Nabisco v. PF Brands

• Decision Date: 01 August 1998
• Docket Number: Docket No. 99-7149
• Citation: 191 F.3d 208
• Parties: (2nd Cir. 1999) NABISCO, INC. and NABISCO BRANDS COMPANY, Plaintiffs-Counter-Defendants-Appellants, v. PF BRANDS, INC. and PEPPERIDGE FARM, INC., Defendants-Counter-Claimants-Appellees, (L)
• Court: U.S. Court of Appeals — Second Circuit

Page 208

191 F.3d 208 (2nd Cir. 1999)

NABISCO, INC. and NABISCO BRANDS COMPANY, Plaintiffs-Counter-Defendants-Appellants, v. PF BRANDS, INC. and PEPPERIDGE FARM, INC., Defendants-Counter-Claimants-Appellees,

Docket No. 99-7149 (L)

August Term, 1998

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: March 31, 1999

Decided: October 26, 1999

Appeal from a preliminary injunction entered by the United States District Court for the Southern District of New York (Shira A. Scheindlin, District Judge). The district court enjoined Nabisco from distributing an orange, bite-sized, cheese-flavored goldfish-shaped cracker that closely resembles Pepperidge Farm's trademark Goldfish cracker. The Court of Appeals (Leval, J.) affirms the preliminary injunction. [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] MARIE V. DRISCOLL, New York, N.Y. (Robert A. Becker and Ronald E. Wiggins, Fross, Zelnick, Lehrman & Zissu, P.C., New York, N.Y., James B. Swire, Sandra Edelman and Bruce R. Ewing, Dorsey & Whitney LLP, New York, N.Y., On the Brief, Steven H. Hartman, Parsippany, N.J., Of Counsel), for Plaintiffs-Counter-Defendants-Appellants.

FLOYD ABRAMS, New York, N.Y. (Jennifer Barrett and Elai Katz, Cahill Gordon & Reindel, New York, N.Y., Ethan Horwitz and Ira J. Levy, Darby & Darby, P.C., New York, N.Y., Of Counsel), for Defendants-Counter-Claimants-Appellees.

Before: LEVAL and SACK, Circuit Judges, and MORAN, District Judge.^*

LEVAL, Circuit Judge:

Nabisco, Inc. and Nabisco Brands Company (collectively "Nabisco") appeal from the preliminary injunction entered by the United States District Court for the Southern District of New York (Shira A. Scheindlin, District Judge) upon the motion of Pepperidge Farm, Inc. and PF Brands, Inc. (collectively "Pepperidge Farm" or "Pepperidge"). The district court found that Nabisco's use of an orange, bite-sized, cheddar cheese-flavored, goldfish-shaped cracker (as part of a tie-in promotion of a Nickelodeon Television Network television production) would dilute the distinctive quality of Pepperidge Farm's mark consisting of an orange, bite-sized, cheddar cheese-flavored, goldfish-shaped cracker, in violation of the Federal Trademark Dilution Act ("FTDA"), section 43(c) of the Lanham Act, 15 U.S.C. §1125(c), and New York's antidilution statute, N.Y. Gen. Bus. Law §360-l. The court entered an order requiring Nabisco to recall and cease selling its goldfish cracker. We affirm.

BACKGROUND

1. Facts

Pepperidge Farm has produced small crackers in the shape of a goldfish (the "Goldfish" cracker) continuously since 1962. Although the Goldfish line of products includes crackers in various flavors and mixes, the primary product is the orange, cheddar cheese-flavored, fish-shaped cracker, sold in a bag or box under the trade name "Goldfish" and exhibiting a picture of the cracker on the exterior. The company has obtained numerous trademark registrations for the Goldfish design and name. In 1994, it launched an aggressive marketing campaign directed at children, who make up about half of Goldfish consumers, and between 1995 and 1998, it spent more than $120 million marketing the Goldfish line nationwide. The cracker has also been the subject of substantial media coverage, including a feature on "The Today Show" and an episode on "Friends." From 1995 to 1998, net sales of Goldfish crackers more than doubled, to $200 million per year. Measured by sales volume, Pepperidge Farm's Goldfish is the second-largest selling cheese snack cracker in America today. Measured in sales dollars, Goldfish ranks number one.

Occasionally, companies other than Pepperidge Farm have produced cheese crackers shaped like sea creatures, including "Guppies," "Dolphins & Friends," and "Whales." Only one of these products has included a cracker shaped like a goldfish-Nabisco's "Snorkels." Snorkels obtained only a small market share, and it is no longer on the market.

In spring 1998, Nickelodeon Television Network approached Nabisco to explore a possible joint promotion for Nickelodeon's new cartoon program, "CatDog." In August 1998, Nabisco and Nickelodeon entered a Joint Promotion Agreement ("JPA"), giving Nabisco the right to produce cheese crackers in shapes based on the CatDog cartoon. The agreement required Nabisco to print on its packages that "CatDog and related titles, logos and characters are trademarks of" Nickelodeon's parent, Viacom International, Inc. Nabisco's CatDog product was intended to compete with other animal-shaped cheese crackers marketed to children.

The star of the CatDog cartoon program is the CatDog-a two-headed creature that is half cat and half dog. Each half of the CatDog has a distinct personality. The fish is the favorite food and the symbol for the cat half; the bone is the preferred meal and emblem for the dog half. Other characters that are featured on the cartoon include a mouse, a rabbit, a squirrel, and several dogs. In its first three months, the CatDog show garnered a 3.9 Nielsen rating, making it close to the most widely watched program for children.

Pursuant to its agreement with Nickelodeon, Nabisco developed a CatDog snack that consists of small orange crackers in three shapes: half the crackers in a package are in the shape of the two-headed CatDog character, one-quarter in the shape of a bone, and one-quarter in the shape of a fish. The fish-shaped cracker closely resembles Pepperidge Farm's Goldfish cracker in color, shape, and size, and taste, although the CatDog fish is somewhat larger and flatter, and has markings on one side. The CatDog product was to be sold in boxes featuring the CatDog and showing fish and bones in the background. The launch of the CatDog product was set for February 1, 1999.

2. Proceedings Below

In mid-December 1998, executives at Pepperidge Farm for the first time saw a sample of the CatDog product. On December 21, Pepperidge Farm wrote to Nabisco protesting the goldfish-shaped cracker and requesting that Nabisco cease and desist use of that cracker in its product and marketing. Nabisco responded by filing a complaint against Pepperidge Farm seeking a declaratory judgment under 28 U.S.C. §2201 that the CatDog product did not violate any of Pepperidge Farm's rights in the Goldfish. Pepperidge Farm counterclaimed that Nabisco's goldfish constituted trademark infringement under §43(a) of the Lanham Act, 15 U.S.C. §1125(a), and dilution under the FTDA, §43(c) of the Lanham Act, 15 U.S.C. §1125(c), as well as dilution and unfair competition under New York law. Pepperidge Farm moved for a preliminary injunction barring Nabisco from marketing its product.

The district court found for Pepperidge and granted the preliminary injunction on the federal and state dilution claims, but not on the federal trademark infringement or state unfair competition claims. In a thorough opinion, the district judge concluded that the Pepperidge Farm Goldfish mark is nonfunctional, distinctive and famous and is protectable under the antidilution and infringement statutes. In deciding whether Nabisco's use of a fish in its CatDog product would dilute the Goldfish mark, the court applied the six-factor test proposed in a concurring opinion in Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026, 1035 (2d Cir. 1989) (Sweet, J., concurring), relating to the New York antidilution statute. The court found that each of the six Mead Data factors weighed in favor of a finding of dilution, and concluded that Pepperidge Farm had proven a likelihood of success on the merits of its dilution claims under both federal and state law.

In essence, Pepperidge Farm has taken a unique and fanciful idea-creating a cheese cracker in the shape of a goldfish-and turned this idea into its signature. Nabisco's inclusion of this signature element as part of the CatDog product strikes at the heart of what dilution law is intended to prevent: the "gradual diminution or whittling away of the value of the famous mark by blurring uses by others." Over time, the presence of Nabisco's goldfish shaped cracker within the CatDog mix is likely to weaken the focus of consumers on the true source of the Goldfish.

Nabisco, Inc. v. PF Brands, Inc., 50 F.Supp.2d 188, 209-10 (S.D.N.Y. Feb. 3, 1999) (to be reported at 50 F. Supp. 2d 188) (internal citation omitted). The court also concluded that likelihood of dilution "automatically" establishes irreparable harm, because "[d]ilution is itself an injury which [cannot] be recompensed by money damages." Id. at 197 (quoting Deere & Co. v. MTD Prods., Inc., 860 F. Supp. 113, 122 (S.D.N.Y.), aff'd, 41 F.3d 39 (2d Cir. 1994)).

On the other hand the court found that Pepperidge Farm had failed to show a likelihood of success in establishing a claim of trademark infringement. This conclusion was primarily supported by Pepperidge Farm's failure to demonstrate that any actual confusion had occurred among consumers, and the fact that Nabisco's goldfish was part of a three-shape mixture and came in a package that featured most prominently the CatDog, rather than the fish.

Based on its finding of likely success in proving dilution, the court ordered Nabisco to recall and cease distributing its goldfish crackers. Nabisco appeals.

DISCUSSION

Nabisco's primary contentions on appeal are that: (1) Pepperidge Farm failed to show likelihood of success in proving dilution, because, in the market context (a) consumers would not associate the two products, and (b) Nabisco's mark was not substantially similar to Pepperidge Farm's; (2) the antidilution statutes were adopted to protect against dilution by the use of a similar mark on a non-competing product and do not apply to trademarks on competing products, which are governed instead by the infringement standard; (3) Nabisco's use of a fish is not a "trademark use" and is thus not actionable under the antidilution statutes; (4) dilution cannot be found without...