Isaly Co. v. Kraft, Inc.

• Decision Date: 15 July 1985
• Docket Number: No. 82-517 Civ-T-10.,82-517 Civ-T-10.
• Parties: The ISALY COMPANY, Plaintiff, v. KRAFT, INC., Defendant.
• Court: U.S. District Court — Middle District of Florida

619 F. Supp. 983

226 USPQ 801

The ISALY COMPANY, Plaintiff, v. KRAFT, INC., Defendant.

No. 82-517 Civ-T-10.

United States District Court, M.D. Florida, Tampa Division.

July 15, 1985.

COPYRIGHT MATERIAL OMITTED

Rodney Morgan, Shear, Newman & Hahn, P.A., Tampa, Fla., D. Rein, Robert M. Kunstadt, Michael C. Stuart, Pennie & Edmonds, New York City, for plaintiff.

Thomas T. Steele, Fowler, White, Gillen, Boggs, Villareal & Banker, P.A., Tampa, Fla., Jerome Gilson, Susan C. Cramer and Gary M. Ronski, William, Brinks, Olds, Hoffer, Gilson & Lione, Ltd., Chicago, Ill., for defendant.

ORDER

HODGES, Chief Judge.

This action came before the Court for a nonjury trial. In accordance with Rule 52(a), F.R.Civ.P., the following shall constitute the Court's Findings of Fact and Conclusions of Law:

The Plaintiff, Isaly Company, Inc. (Isaly) 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 Court has jurisdiction pursuant to 28 U.S.C. § 1338 and 15 U.S.C. § 1121.

The parties are competitors in the manufacture and sale of five ounce, square, chocolate-covered ice cream bars, the KLONDIKE and the POLAR B'AR, respectively. The packaging for their products is the focal point of their dispute. Specifically, Isaly asserts: Count 1 — that Kraft's packaging constitutes a false designation of origin in violation of 15 U.S.C. § 1125(a); Count 2 — infringement of registered trademarks covering Isaly's label and package designs in violation of 15 U.S.C. § 1114(a); Count 3 — common law unfair competition; Count 4 — dilution of Isaly's trade dress rights in violation of Florida Statute Section 495.151 et seq.; and Count 5 — statutory unfair competition in violation of Florida Statute Section 501.201, et seq.

Kraft denies all of Isaly's claims and asserts the affirmative defenses of laches, acquiescence, and fraudulent trademark registrations. Kraft also counterclaims for cancellation of Isaly's trademark registrations and for damages.¹

BACKGROUND OF THE DISPUTE

In 1928 the Isaly Company was a family owned dairy business operating in Eastern Ohio and Western Pennsylvania. It began manufacturing five ounce chocolate-covered ice cream bars and sold them under the name KLONDIKE in family owned "deli's." In 1972 Isaly was purchased by an investment group headed by Gaylord Lamond. Five years later that group sold its interest in Isaly to the Clabir Corporation. In October 1981 and in May 1982 Clabir sold the Isaly "deli's," but retained the Isaly Company, Inc., and its business of manufacturing and selling Klondike bars.

Prior to May 1978, the Klondike bar was sold in a tri-state area comprising Western Pennsylvania, Eastern Ohio and Northern West Virginia. The product was advertised in newspapers and in point-of-sale materials in stores, both of which featured a polar bear emblem found on the bar's wrapper. The Klondike bar was also advertised on television. The commercial featured a prospector and a polar bear in a supermarket.

In late 1978, Isaly began to investigate the possibility of expanding the market for the Klondike. It planned to introduce the bar through distributors into supermarkets and convenience stores in various expansion markets.

Kraft is an international manufacturer and distributor of food products. A division of Kraft, the Dairy Group, is responsible for Kraft's brandname dairy products which are marketed principally under the brandnames "Sealtest" and "Breyers." Through a predecessor in interest, Kraft adopted the Sealtest trademark in 1935. The mark is often featured on Kraft's ice cream products. Since 1970, Kraft and its Dairy Group, have distributed ice cream products made by other companies in addition to its own.

In September 1978, Teck Heck, Isaly's marketing consultant, met with Robert Zogby, Vice President of Sales and Marketing of the Kraft Dairy Group, concerning a distribution arrangement between the parties. They orally agreed that Kraft would become Isaly's exclusive distributor for the Klondike bar in Florida. Isaly would be responsible for advertising the Klondike, and Kraft would be responsible for retail chain sales authorizations, distribution and store coverage, including installation of point-of-sale materials.

In early 1979, Kraft began distributing the Klondike in Florida. The parties stipulate that the introduction of the bar into the Florida market was very successful. In October of that year representatives of Isaly and Kraft met again and discussed Kraft's interest in purchasing Isaly or in having Isaly pack Klondike bars for Kraft under the Sealtest name. James Santerre, President of Isaly, testified that Isaly wanted Kraft to expand its distribution of the Klondike, but that Kraft was reluctant to do so without a proprietary interest in the product. Kraft's proposals to purchase Isaly, or have Isaly contract-pack the Klondike, were rejected by Isaly.

From 1978 to the present the Klondike bar has been wrapped in pebbled foil presenting a 3 × 3 inch silver panel featuring a white and blue polar bear standing on all fours before a sunburst design. KLONDIKE was written in large letters beneath the bear and "Isaly's" appeared in small script lettering to the right of the bear. Originally, the Klondike bar was available in two versions, plain and "krispy." On the wrapper of the plain version, the sunburst designs and the name KLONDIKE were white and white and blue, respectively. The "krispy" version featured a yellow sunburst and a yellow and blue "Klondike" and polar bear. Isaly subsequently added a chocolate version which features a brown and blue sunburst and KLONDIKE on the wrapper. The Klondike bars were sold in a silver tray which also featured a large numeral "6" and was overwrapped in transparent plastic.

The "plain" Klondike bar has been wrapped in pebbled foil featuring the colors silver and blue since the 1940's. Since at least 1956 the colors silver, white and blue, KLONDIKE, "Isaly's" and a polar bear have been featured on the wrapper. Beginning in 1963 the Klondike bar was available in a six pack arrangement, and between 1963 and 1978 some six packs were in overwrapped trays while other six packs were simply overwrapped in clear plastic without a tray. In 1978 Isaly modernized the bar's wrapper and tray. The colors, images and words on the wrapper remained the same; however, KLONDIKE was emphasized, "Isaly's was reduced in size, and the stance of the polar bear was altered. In addition, since that time, all six packs have been sold in overwrapped trays.

In late 1979, the same year Kraft began distributing KLONDIKES in Florida, Kraft began to develop its own five ounce, chocolate-covered ice cream bar. At the time there were three other ice cream bars available in the market in addition to the Klondike bar: the Eskimo Pie Penguin Bar, the Yukon Bar and the Gold Rush Bar.

Kraft's new bar was to be named POLAR B'AR. Don Herr, the Dairy Group's new product development manager, testified that he found the name on a list of unused Kraft trademarks. POLAR B'AR had been the name of an ice cream bar sold by a predecessor of Kraft, Southern Dairies, Inc. (Southern), from 1929 to 1932. The rectangular bar made by Southern was wrapped in pebbled silver foil, featured "Polar B'ar" in gold lettering, and bore the image of a white polar bear in an artic setting. The trademark registration was periodically renewed and, through merger, became owned by Kraft. Southern also obtained a federal trademark registration for the polar bear representation on the wrapper, No. 257,988. However, that registration expired in 1969.

In February 1980, Kraft hired Thomas J. Paul, Inc., a design firm, to design packaging for the new Polar B'ar ice cream product. The Paul firm stated in a memo to Kraft that the proposed ice cream bar would be "overwrapped with foil in the manner of the Isaly's Klondike product, complete samples of which have been supplied to us. Client will also pack his product six packages to a board tray with a celophane overwrap as per the Isaly's sample." (Plaintiff's Trial Exhibit 98A).²

In July-August, 1980 Kraft introduced its Sealtest Polar B'ar into the market. Kraft was still the exclusive distributor of Isaly's Klondike bar in Florida. At the time of its introduction the Polar B'ar was wrapped in pebbled foil and presented a 3 × 3 inch silver panel with a white polar bear standing on all fours contained within a triangular color panel in the bottom corner of the bar. POLAR B'AR was written in large block letters diagonally across the center of the bar. POLAR B'AR was written in large block letters diagonally across the center of the bar. "Sealtest," in script, appeared in a red box in the upper left corner, and the phrase "made with real milk chocolate" was contained in a red circle at the bottom left corner of the bar.

In 1980 Polar B'ars were sold in two forms: plain and "crunchy." The colors of the triangle containing the bear and POLAR B'AR varied with each version. On the plain version, the triangle and POLAR B'AR were royal blue. On the "crunchy" they were red. At the time of trial Kraft sold four versions of the bar. In addition to plain and "crunchy," Polar Ba'r was available in chocolate and mint flavors. On those versions the triangle and the brandname were colored in brown and green, respectively.³

Polar B'ars were sold in a six pack tray overwrapped in clear plastic. The tray was silver and displayed a large numeral "6" between the brandname and the product description. Kraft promoted the bar by television and newspaper coupon advertising. Its television commercial featured the image of a bear, punctuated by the bear's roar while transitioning to the Polar B'ar wrapper.

Kraft was the exclusive distributor of the Klondike bar in Florida from 1979 until 1982. On February 24, 1982 Kraft notified...