AJ Canfield Co. v. Concord Beverage Co.

• Decision Date: 23 December 1985
• Docket Number: Civ. A. No. 85-5085.
• Citation: 629 F. Supp. 200
• Parties: A.J. CANFIELD COMPANY v. CONCORD BEVERAGE COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

629 F. Supp. 200

A.J. CANFIELD COMPANY v. CONCORD BEVERAGE COMPANY.

Civ. A. No. 85-5085.

United States District Court, E.D. Pennsylvania.

December 23, 1985.

COPYRIGHT MATERIAL OMITTED

Richard H. Compere, Chicago, Ill., for plaintiff.

Arthur H. Seidel, Philadelphia, Pa., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SCIRICA, District Judge.

Subsequent to filing a complaint for federal and common law unfair competition, plaintiff petitioned for a preliminary injunction forbidding use of the designation "Chocolate Fudge" in connection with the defendant's diet chocolate fudge soda. At a hearing on the motion, each side presented testimony and expert evidence. On the basis of the following findings of fact and conclusions of law, I conclude that plaintiff's motion should be denied.

I. FINDINGS OF FACT

1. Plaintiff, A.J. Canfield Company ("Canfield"), is a corporation having its principal place of business in Chicago, Illinois.

2. Defendant, Concord Beverage Company ("Concord"), is a Pennsylvania corporation having its principal office in Concordville, Pennsylvania.

3. Plaintiff has been in business since 1924 and, as a well-established major Chicago bottler which makes and sells soft drinks in the mid-west, has a six (6%) or seven (7%) percent share of the Chicago soft drink market, in which both national and local "private label" companies compete.

4. Defendant manufactures, bottles and sells soft drinks under the house mark "Vintage" in Pennsylvania, New Jersey, and New York.

5. Plaintiff produces a line of sugar-sweetened and artificially sweetened "diet" sodas. The diet line includes nine different flavors.

6. In the early 1970s plaintiff began marketing a low-calorie chocolate soda, which is artificially sweetened and flavored.

7. At approximately that time, plaintiff also began using the designation "chocolate fudge" for this new product.

8. From 1973 to 1984, plaintiff's annual sales of diet chocolate fudge soda fluctuated from a high in 1973 of 347,000 cases to a low in 1979 of 19,000. In 1984, plaintiff sold 51,000 cases.

9. The market for soft drinks is unstable; it can fluctuate significantly.

10. During the period 1973 to 1984, plaintiff after an initial expenditure in 1973 of approximately $250,000 for advertising, spent an annual average of $100,000 promoting its entire line of diet soda, which included chocolate fudge soda.

11. During this period, plaintiff also received some publicity about its diet chocolate fudge soda from a Chicago Tribune article that traced the drink's development.

12. In 1984, plaintiff switched its entire line of diet soda to 100% Nutra-Sweet sweetener and spent nearly $400,000 advertising these diet sodas.

13. Through the first nine months of 1985, plaintiff spent approximately $305,000 advertising diet chocolate fudge soda.

14. Plaintiff has employed a public relations firm since 1982 or 1983 and has established promotions that include bumper stickers and beach towels.

15. Prior to January 13, 1985, plaintiff's soda line, including diet chocolate fudge soda, was sold primarily in Illinois, Indiana, Michigan and Wisconsin.

16. On January 13, 1985, the Chicago Tribune carried a column written by Bob Greene concerning plaintiff's diet chocolate fudge soda. Greene compared plaintiff's diet chocolate fudge soda to a hot fudge sundae and described how it had helped him maintain his diet by satisfying his desire for chocolate.

17. As a result of Bob Greene's column, which is syndicated and appears in at least 80 newspapers, a tremendous demand was created for plaintiff's diet chocolate fudge soda. Approximately 1.6 million cases of plaintiff's diet chocolate fudge soda were sold in the first seven months of 1985. Another 2.1 million cases were produced by plaintiff's licensees. Initially, plaintiff was unable to satisfy the demand for the soda, especially in areas outside of the mid-west where the product had never been sold.

18. Following the appearance of Bob Greene's column, stories on plaintiff's diet chocolate fudge soda were featured in various print media (e.g., The New York Times, Time Magazine, The Philadelphia Daily News, The Washington Post, People Magazine) and on various television shows (e.g., "CNN News Broadcast," "CBS Morning News," "Good Morning America," "PM Magazine".)

19. Following the appearance of Bob Greene's column, many bottling companies sought licenses for plaintiff's diet chocolate fudge concentrate.

20. Among those interested in obtaining a license for plaintiff's product was defendant's president, Harold Honickman, who contacted plaintiff's president in approximately February 1985.

21. At that time, Mr. Honickman informed plaintiff's president that his company wanted to sell diet chocolate fudge soda, for which he had already received a large order, and he requested a license.

22. There was a second telephone conversation between Mr. Honickman and plaintiff's president, but defendant received neither a licensing or franchise agreement. Defendant then prepared its own diet chocolate soda, which it also called diet "chocolate fudge" soda.

23. Plaintiff eventually granted eleven U.S. licenses to companies other than defendant.

24. Defendant's familiarity with plaintiff's product and his two attempts at procuring a license indicate that defendant intended to and did copy plaintiff's designation.

25. In the late winter and spring of 1985, plaintiff granted licensing agreements for at least a portion of the area in which defendant distributed its soda products. These licensing agreements cover diet chocolate fudge soda and plaintiff's other products.

26. For the first two months each licensee was granted an advertising allowance of 20¢ per case, to be used as the licensee saw fit. Although plaintiff also supplied the licensees with advertising material, plaintiff has "no knowledge of the advertising or promotion that has gone on by its licensees." (Sic.)

27. The licensing agreements brought plaintiff revenues and maintained the quality of the product distributed under its housemark by other bottlers, since plaintiff took great care when selecting its licensees.

28. Regardless of these agreements, plaintiff itself, between mid-February and late March 1985, shipped to Baltimore approximately 8,600 cases of diet chocolate fudge soda which were distributed up to 250 miles outside of Baltimore. Plaintiff also shipped approximately 11,000 cases to the Pittsburgh area between mid-March and late April 1985 and 200 cases to the "New York—Philadelphia—Baltimore" area in March or April 1985.

29. Plaintiff's diet chocolate fudge soda was not sold to consumers in defendant's market until some time after mid-February 1985. Prior to this time, plaintiff's products were seen rarely, if at all in defendant's market area.

30. Plaintiff granted a license to the Hamblet Advertising Agency and/or the 7-Up Bottling Company of Philadelphia covering a portion of defendant's market area. Distribution of the plaintiff's diet chocolate fudge product under that agreement did not begin until late May 1985. The licensee under this arrangement had distribution rights in two to eight states, and initially sold 50,000 cases in just over one week.

31. Although the evidence as to the exact date defendant began selling its diet chocolate fudge soda is imprecise, defendant's sales under the housemark "Vintage" began between late April and late May 1985. As of October 1985 defendant had sold approximately 50,000 cases of its product.

32. Both plaintiff's and defendant's diet chocolate fudge soda products contain carbonated water, artificial chocolate flavor and color, potassium benzoate and malic acid. Neither product contains sugar, milk, chocolate or butter, the ingredients with which chocolate fudge candy is generally made.

33. Both plaintiff's and defendant's product do, however, have a rich chocolate taste and aroma although they taste different.

34. Plaintiff's spring 1985 application (Serial No. 73/529296) for protection of the designation "chocolate fudge" under the Lanham Act was rejected as merely descriptive by an examining attorney at the U.S. Patent and Trademark Office on May 23, 1985.

35. In late August—early September 1985, plaintiff conducted a telephone survey in the Chicago area for the purpose of determining whether "chocolate fudge" had acquired a secondary meaning.

36. No survey however, has been presented to demonstrate whether "chocolate fudge" has established in defendant's market a secondary meaning as to the origin of plaintiff's product.

37. Alan Canfield stated that he did not know whether such a survey conducted in defendant's market would show that consumers associate "chocolate fudge" with plaintiff.

38. On July 8, 1985, after a hearing on a preliminary injunction, Judge Shadur of the U.S. District Court for the Northern District of Illinois concluded that there was a reasonable basis for holding that "chocolate fudge" as used by plaintiff is suggestive, but that if not, there was as to the Chicago area, "a substantial likelihood Canfield's will be able to show chocolate fudge, as the result of thirteen years of use and advertising and with the enormous springboard presented by the Greene article and the ensuing nationwide publicity and skyrocketing demand, has obtained the requisite secondary meaning to entitle Canfield to trademark protection." A.J. Canfield Co. v. Vess Beverages, Inc., 226 U.S.P.Q. (BNA) 811, 818, 612 F.Supp. 1081 (N.D.Ill. 1985).

39. On July 10, 1985, plaintiff sent to defendant a cease and desist letter and a copy of Judge Shadur's opinion.

40. Plaintiff's diet chocolate fudge soda evolved at the request of Alan Canfield, who approximately 15 years ago, presented plaintiff's chemist with some chocolate fudge candy and asked him to duplicate the flavor for use in a carbonated drink.

41. The Carnation Company uses "chocolate fudge" nationally as a flavor designator for its "Slend...