Nestle Co., Inc. v. Chester's Market, Inc., Civ. No. H-82-445.

• Decision Date: 23 August 1983
• Docket Number: Civ. No. H-82-445.
• Citation: 571 F. Supp. 763
• Court: U.S. District Court — District of Connecticut
• Parties: The NESTLE COMPANY, INC. v. CHESTER'S MARKET, INC., and Saccone's Toll House, Inc.

571 F. Supp. 763

The NESTLE COMPANY, INC. v. CHESTER'S MARKET, INC., and Saccone's Toll House, Inc.

Civ. No. H-82-445.

United States District Court, D. Connecticut.

August 23, 1983.

COPYRIGHT MATERIAL OMITTED

Thomas J. Ward, Michael A. Grow and Niles V. Montan, Washington, D.C., John F. Murphy, Jr., Stephen E. Goldman and Susan P. McHugh, Robinson, Robinson & Cole, Hartford, Conn., for plaintiff.

Ralph C. Dixon and Richard Reynolds, Day, Berry & Howard, Hartford, Conn., Barry H. Garfinkel, Herbert F. Kozlov and Jonathan J. Lerner, Skadden, Arps, Slate, Meagher & Flom, New York City, Dominic J. Ferraina, Windsor, Conn., for defendants.

RULING ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

BLUMENFELD, Senior District Judge.

This is an action for trademark infringement and unfair competition brought by The Nestle Company, Inc. stemming from the concurrent use of the term "Toll House" by Nestle and defendant Saccone's Toll House, Inc. Nestle is the owner of five federally registered trademarks for Toll House: for chocolate, for cookies, for cookie mix, for spice flavored and butterscotch flavored morsels, and for prepared edible chocolate. Defendant Saccone uses Toll House in its corporate name, as the name of the inn it owns and operates, and in connection with the cookies it bakes and sells. These cookies are allegedly sold at, among other places, defendant Chester's Market, Inc., a grocery store in East Windsor, Connecticut. It is, of course, the use of Toll House on the cookies that Saccone sells that has caused Nestle to initiate this lawsuit.

The matter is before this court on the motion of the defendants for summary judgment dismissing plaintiff's complaint in its entirety, cancelling plaintiff's Toll House trademark registrations and granting defendants judgment on some of their counterclaims and affirmative defenses. There are three separate grounds for granting summary judgment: (1) that the term Toll House is generic; (2) that Nestle has never acquired enforceable trademark rights or has abandoned any rights it may once have had to use Toll House on cookies, cookie mix, cake mix, and butterscotch morsels; and (3) that the plaintiff was never entitled to register Toll House because the conveyance to plaintiff of the right to use the term was invalid in that it failed to transfer any of the goodwill associated with the term. Although the defendants' original motion papers sought the cancellation of all of Nestle's Toll House trademark registrations, counsel at oral argument on the motion limited the motion to the cancellation of the Toll House registration for cookies. Transcript, at 42, 49.

I. BACKGROUND

A. Origin of The Term Toll House

Insight into the meaning of Toll House as a trademark is gained by examination of its history. Both Nestle and Saccone derive their uses of the term Toll House from the Toll House Inn in Whitman, Massachusetts. Ruth Wakefield, along with her husband, founded the inn in the 1930's in a house which once functioned as a toll house on the road between Cape Cod and Boston. In the late 1930's Mrs. Wakefield earned a place in American folklore through her invention of a cookie recipe. According to legend, the invention was a fortuitous accident. One day Mrs. Wakefield decided to add bits of semi-sweet Nestle chocolate to her traditional butter cookie dough, expecting to end up with chocolate cookies. The bits, however, held their shape and a new cookie was born. The name given this cookie at the time is a matter of dispute. According to Saccone, this cookie was named and became famous as the Toll House cookie. Nestle prefers the designation chocolate chip cookie for the purpose of this litigation, but in its advertising and promotional efforts it has long referred to the cookies made using Mrs. Wakefield's recipe as Toll House cookies.

Under whatever name, the home baking of these cookies in the Whitman, Massachusetts, area became so popular that sales of the crucial ingredient, Nestle's semi-sweet chocolate, increased in that area. This phenomenon attracted the attention of Nestle's predecessor, Lamont, Corliss & Company. Beginning in 1939, the Wakefields entered into a series of agreements giving Lamont exclusive rights to use the name Toll House in connection with chocolate and food products. Mr. and Mrs. Wakefield also agreed to give Lamont advice and suggestions on recipes involving chocolate. In 1948 Lamont, Corliss gave the Wakefields permission to use the Toll House name on cookies.

The Wakefields continued to operate the Toll House Inn until approximately 1968, at which time it was sold to the Noel family. In 1972 the Saccone family acquired the inn and they now operate it as a restaurant and bakery business.

B. The Development of Toll House

Lamont began selling chocolate under the name Toll House. To save the bakers the chore of chopping up the bar form, it was soon selling pre-packaged pieces of chocolate it called morsels. These Toll House chocolate morsels are today one of the most widely sold food products in the United States. Over $1 billion of morsels have been sold over the past ten years. Advertising and promotional expenses for the morsels have totaled more than $140 million during this time. Approximately 70% of the morsels sold in the United States end up in home-baked cookies. Consequently, much of this advertising has emphasized the use of the morsels as a cookie ingredient. Nestle does not dispute that it has used Toll House as a recipe title for home-baked cookies as well as a brand name for packaged cookies.

Nestle claims that Lamont, Corliss sold packaged Toll House cookies in Woolworth stores and other retail outlets throughout the country in the 1940's. Lamont was merged into the Nestle Co., Inc. in 1952. From the 1960's to 1980 Nestle claims Toll House cookies were sold in White Plains, New York. Finally, much more substantial volumes of Toll House cookies have allegedly been sold since 1980 at Walt Disney World under an agreement with Nestle.

II. THE TEST FOR GENERICNESS

Section 14(c) of the Lanham Act, 15 U.S.C. § 1064(c), provides for the cancellation of a trademark if "at any time it becomes the common descriptive name of an article or substance." Courts commonly label such terms generic. See, e.g., Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir.1976).

It is helpful to keep in mind some of the basic principles of trademark law. While many associations may be invoked by a word, the only one which is of any significance as a trademark is its use in denoting the source of the product it labels. See Anti-Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 304 (9th Cir.1979) (Anti-Monopoly I). "Source identification is the only word function which trademark law is designed to protect." Id. Trademarks enable buyers to differentiate between goods and services by their source, thus rewarding the producer who provides consistent quality.

Used as a means of identifying the trademark owner's products, a trademark "makes effective competition possible in a complex, impersonal marketplace by providing a means through which the consumer can identify products which please him and reward the producer with continued patronage." ...

Moreover, once this goodwill is established, trademarks become an extremely important medium of advertisement. Provided that the public continues to understand the trademark term primarily as a source identifier, the particular producer is exclusively entitled to benefits flowing from the mark's sales appeal.

... But all of these legitimate trademark purposes derive ultimately from the mark's representation of a single fact: the product's source. It is the source-de-noting function which trademark laws protect, and nothing more.

Id. at 301 (footnote omitted, emphasis added) (quoting Smith v. Chanel, Inc., 402 F.2d 562, 566 (9th Cir.1968). It follows from this that "if the primary significance of the trademark is to describe the type of product rather than the producer, the trademark has become a generic term and is no longer a valid trademark." Anti-Monopoly I, 611 F.2d at 304. Thus, "no matter how much money and effort the user of a generic term has poured into promoting the sale of its merchandise and what success it has achieved in securing public identification, it cannot deprive competing manufacturers of the right to call an article by its name." Abercrombie & Fitch v. Hunting World, 537 F.2d at 9.

The hoary case involving the cereal shredded wheat, Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 59 S.Ct. 109, 83 L.Ed. 73 (1938), is still one of the best examples of how the doctrine of genericness works. From 1895 to 1912, National Biscuit and its predecessor possessed a patent on the manufacture of the shredded, pillow-shaped, wheat biscuits. After 1912 National Biscuit conceded that it no longer possessed the exclusive right to make shredded wheat, but it claimed the exclusive right to make the biscuits pillow-shaped and to use the name Shredded Wheat to describe them. The district court agreed and issued an injunction forbidding Kellogg from either using the name Shredded Wheat or making pillow-shaped biscuits. The Supreme Court reversed.

The plaintiff has no exclusive right to the use of the term "Shredded Wheat" as a trade name. For that is the generic term of the article, which describes it with a fair degree of accuracy; and is the term by which the biscuit in pillow-shaped form is generally known by the public. Since the term is generic, the original maker of the product acquired no exclusive right to use it. As Kellogg Company had the right to make the article, it had, also, the right to use the term by which the public knows it.

Id. at 116-17, 59 S.Ct. at 112-13. Later on the Court stated:

To establish a trade name in the term "shredded wheat" the plaintiff must show more than a subordinate meaning an association of the product with the plaintiff's factory which

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