Hershey Creamery Co. v. Hershey Chocolate Corp.

• Decision Date: 08 May 1967
• Docket Number: Civ. A. No. 66-3915.
• Citation: 269 F. Supp. 45
• Parties: HERSHEY CREAMERY COMPANY, Plaintiff, v. HERSHEY CHOCOLATE CORPORATION and Consolidated Foods Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

269 F. Supp. 45

HERSHEY CREAMERY COMPANY, Plaintiff, v. HERSHEY CHOCOLATE CORPORATION and Consolidated Foods Corporation, Defendants.

Civ. A. No. 66-3915.

United States District Court S. D. New York.

May 8, 1967.

COPYRIGHT MATERIAL OMITTED

Robert B. Whittredge, William J. Barnes, Fish, Richardson & Neave, New York City, for plaintiff.

Arthur Seidel, Seidel & Gonda, Philadelphia, Pa., William M. Bradner, Jr., and Dunnington, Bartholow & Miller, New York City, for defendant.

Motion for Preliminary Injunction Findings of Fact and Conclusions of Law

MOTLEY, District Judge.

Plaintiff, Hershey Creamery Company (Creamery), is a Delaware corporation having its principal place of business in Harrisburg, Pennsylvania. Its chief business interest in this law suit is the manufacture and sale, in interstate commerce, of ice cream and ice cream products under the trade name and trademark HERSHEY'S. One of plaintiff's products is chocolate covered ice cream bars which bear its trademark HERSHEY'S.

Defendant Hershey Chocolate Corporation (Chocolate) is also a Delaware corporation having its principal place of business in Hershey, Pennsylvania. This defendant's business is the manufacture and sale of chocolate bars, chocolate coatings and many other kinds of chocolate products, likewise in interstate commerce, under its famous trademark HERSHEY'S.

Defendant Consolidated Foods Corporation (Joe Lowe) is a Maryland corporation with a place of business in New Jersey. This second defendant, and in particular its Joe Lowe Company Division, is the owner of the well known trademark CHEERIO for chocolate coated ice cream bars. Defendant Consolidated and its Joe Lowe Division are engaged in the business of licensing companies throughout the country in the production of chocolate covered ice cream bars and in the use of its trademark CHEERIO.

Defendant Chocolate recently licensed the other defendant to use and sublicense the use of Chocolate's well known trademark HERSHEY'S, under certain conditions, in connection with defendant's ice cream bar business.

Both defendants are licensed to do business in New York.¹

On November 17, 1966, plaintiff commenced this action. In its complaint, plaintiff alleges that defendants are infringing plaintiff's registered trademark HERSHEY'S in the ice cream bar field, unfairly competing with plaintiff in violation of the common law, and using false designations of origin, false descriptions, and false representations as to the ice cream bars sponsored by defendants. Plaintiff's first cause of action arises under 15 U.S.C. § 1114. Plaintiff's second cause of action is based in the common law. Plaintiff's third cause of action arises under 15 U.S.C. § 1125(a).

The relief sought by plaintiff is a preliminary and permanent injunction restraining defendants from the unlawful conduct alleged as well as costs, attorneys fees, loss of profits and other appropriate relief. Plaintiff does not seek to bar defendants from using the famous trademark HERSHEY'S in any fashion. The injunctive relief sought would not debar use of said mark "when it appears within other text material which clearly and specifically associates said mark only with the chocolate coating or flavoring of the Ice Cream Product to which it relates and where such coating or flavoring is supplied by Chocolate."

Defendants have denied all alleged violations of law and have counterclaimed. Defendants seek a declaration that plaintiff's trademark, Registration No. 665,835, is invalid, 15 U.S.C. § 1119, and in connection therewith damages, 15 U.S.C. § 1120. Defendants seek damages allegedly sustained by them as a result of acts of trade libel and interference with their business relations with third parties. Defendants, in addition, seek injunctive relief to prevent plaintiff from releasing further advertisements or statements attacking defendants directly or indirectly. Defendants further desire to recover their attorney's fees and costs.

Plaintiff's reply to defendants' counterclaims contains additional claims seeking to: 1) have defendants' licensing program deemed invalid as a deception of the public, 15 U.S.C. § 1055; 2) have defendants' licensing program deemed invalid because defendants fail to exercise legitimate control over the quality of the goods to be produced under the licensing agreement, 15 U.S.C. §§ 1055, 1127; and 3) have defendants' licensing program deemed invalid as a violation of the antitrust laws, to wit: 15 U.S.C. §§ 14, 18, and 15 U.S.C. §§ 1 and 3.

This court has jurisdiction of this action. 28 U.S.C. § 1338(a) and (b) and 15 U.S.C. § 1121.

Plaintiff's motion for preliminary injunction was filed January 30, 1967, and heard by this court on February 14, 1967.² The motion for preliminary injunction is denied. There are disputed questions of fact which should be resolved in a trial of the issues and not by the weighty affidavits in which these disputed facts are found. The issues raised by the pleadings also make it unclear, at this juncture, what relief the parties will ultimately be entitled to under the applicable law. In short, plaintiff has not sustained its heavy burden of proof, required in a case of this kind, for the grant of a preliminary injunction. The findings of fact and conclusions of law which constitute the grounds for the court's action, as required by Rule 52(a), Fed.R.Civ.P., are set forth below.

On January 3, 1928, plaintiff obtained Trademark Registration No. 237,315 for the name HERSHEY'S for use on ice cream and butter products. This registration expired in 1948. On August 12, 1958, plaintiff became the owner of Trademark Registration No. 665,835 for the name HERSHEY'S on ice cream and butter products. This second registration was issued after first being rejected on the ground that it would likely cause confusion with the trademark of defendant Chocolate (Reg.No.54,041 of June 19, 1906). In 1963, plaintiff filed in the Patent Office with respect to the 1958 registration the use affidavit required by 15 U.S.C. § 1058(a). Thereafter, plaintiff's right to use its registered HERSHEY'S mark in commerce for ice cream and butter became incontestable, 15 U.S. C. § 1065, except as to one of the grounds for which application to cancel a trademark may be filed, at any time, under 15 U.S.C. § 1064(c). That section provides, in part, for cancellation "at any time if the registered mark * * * or its registration was obtained fraudulently * * *." (Emphasis added). Plaintiff claims there was no fraud involved in securing its 1958 registration for its HERSHEY'S mark, only innocent error. Defendants' affidavits raise a question of fact as to this threshold issue. If plaintiff prevails on the trial on this issue, it may then be entitled to further relief.³

On June 19, 1906, defendant, Chocolate, obtained Trademark Registration No. 54,041 for the name HERSHEY'S for use on chocolate, cocoa, and chocolate preparations. This trademark registration is not here challenged. It should be noted that this registration includes use of the name HERSHEY'S on chocolate coatings.

Plaintiff has used its trademark on ice cream products continuously in interstate commerce since at least 1920, and probably from 1910 in the State of Pennsylvania. Defendant has used its famous HERSHEY'S trademark in distinctive silver letters on a maroon background since about 1903 on various chocolate and cocoa products.

Sales of plaintiff's ice cream products under its HERSHEY'S trademark have exceeded $69,000,000 in the period 1955 through 1965. Plaintiff's expenditures in selling, advertising and promoting ice cream products under its HERSHEY'S trademark in the same period have been in excess of $14,000,000.

Chocolate's trademark is one of the celebrated trademarks for chocolate products and has obtained universal recognition. Chocolate's trademark is so well known and recognized in the chocolate product field that its owner refuses to advertise its products through conventional advertising media. Chocolate's annual sales exceed $200,000,000.

Defendant Consolidated is one of the largest corporations in the United States in the food business. Its annual sales are in excess of $800,000,000. Consolidated's Joe Lowe Division is in the ice cream bar business and licenses its famous trademarks for frozen confections. It has had success in licensing its most prominent trademarks for frozen confections on a stick, such as, "POPSICLE", "FUDGESICLE", "CREAMSICLE", and "CHEERIO".

Chocolate and the Joe Lowe Division of Consolidated engaged in a joint research and development effort to find a satisfactory chocolate coating for ice cream bars on a stick. Together, defendants developed a chocolate coating which they believe to be a necessary improvement in the quality of the chocolate coatings on ice cream bars. The present plan is to use this new product on two kinds of ice cream bars. A light chocolate coating will be used on bars in which the ice cream, itself, is chocolate. A darker chocolate coating will be used on the bars in which there is vanilla ice cream.

Chocolate and Joe Lowe have embarked on an ambitious licensing campaign for their jointly developed product. Under an agreement between these defendants, Joe Lowe has licensed and will license ice cream manufacturers who purchase the new coating for use on ice cream bars to co-feature defendant Chocolate's trademark HERSHEY'S in silver letters on a maroon background in the sale of such ice cream bars together with Joe Lowe's famous trademark CHEERIO or the licensee's own trademark.

Defendants have admitted actual knowledge of plaintiff's HERSHEY'S trademark for ice cream products, including chocolate covered ice cream bars, of plaintiff's use of that trademark for such products, and of plaintiff's registration of the mark for such products, all before defendants began their HERSHEY'S licensing arrangements and program.

On October 11, 1966, two representatives of Joe Lowe visite...