North Carolina Dairy Foundation, Inc. v. Foremost-Mackesson, Inc.

• Decision Date: 19 April 1979
• Docket Number: FOREMOST-M
• Citation: 154 Cal.Rptr. 794,92 Cal.App.3d 98
• Court: California Court of Appeals Court of Appeals
• Parties: , 203 U.S.P.Q. 1012 NORTH CAROLINA DAIRY FOUNDATION, INC., G. P. Gundlach & Company, and Knudsen Corporation, Plaintiffs and Respondents, v.cKESSON, INC., Weyerhaeuser Company, Defendants and Appellants. Civ. 40485.

Page 794

154 Cal.Rptr. 794

92 Cal.App.3d 98, 203 U.S.P.Q. 1012

NORTH CAROLINA DAIRY FOUNDATION, INC., G. P. Gundlach & Company, and Knudsen Corporation, Plaintiffs and Respondents, v. FOREMOST-McKESSON, INC., Weyerhaeuser Company, Defendants and Appellants.

Civ. 40485.

Court of Appeal, First District, Division 1, California.

April 19, 1979.

Milton W. Schlemmer, David J. Brezner, Flehr, Hohbach, Test, Albritton & Herbert, San Francisco, for defendants and appellants.

Anthony B. Diepenbrock, Roger L. Cook, Marvin W. Murray, Townsend & Townsend, San Francisco, for plaintiffs and respondents.

Cooper, Taylor, Higbe & Sands, Sacramento, for Crystal Cream and Butter Co., a California Corp., amicus curiae.

Barbara E. Schur, William H. Birnie, Warren N. Brakensiek, Los Angeles, for Carnation Co., amicus curiae.

RACANELLI, Presiding Justice.

Defendants, Foremost-McKesson, Inc. and Weyerhaeuser Company, appeal from an order granting a preliminary injunction in favor of plaintiffs, North Carolina Dairy Foundation, Inc., G. P. Gundlach & Company, and Knudsen Corporation, enjoining defendants from infringing upon plaintiffs' trademark "Sweet Acidophilus" (hereafter "SA") or engaging in any domestic marketing activities using such trademark or any colorable imitation. Defendants contend that the trial court's findings that the term is a protectable trademark through acquisition of a secondary meaning is not supported by law or the evidence. Our view of the record in light of established principles impels a contrary conclusion requiring affirmance of the challenged order.

Procedural Background

Plaintiffs filed a complaint for trademark infringement and unfair competition and false and misleading advertising alleging in substance that: plaintiff Foundation, a nonprofit foreign corporation, developed and perfected a new strain of lactobacillus acidophilus (LBA), a fermenting bacteria used in milk products to aid digestion. The new culture and processing technique eliminates the sour-taste effect caused by the fermenting LBA additive producing a natural or "sweet" tasting milk containing the beneficial digestive properties. Plaintiff Foundation coined and adopted the term "SA" as a trademark for such milk products and granted exclusive promotion and licensing rights to plaintiff Gundlach. Plaintiff Knudsen, the exclusive California sublicensee, undertook an extensive sales and promotional campaign in northern California to establish a market for its newly trademarked products. Within weeks, defendant Foremost, using milk cartons manufactured by defendant Weyerhaeuser, began distribution of its own Tuttle name-brand milk products prominently featuring a similar "SA" mark (see appendix) in a manner likely to create buyer confusion as to the product source. Defendants answered generally denying the charging allegations and alleging the mark possessed no inherent trademark significance and had not acquired a secondary meaning justifying trademark protection.

Plaintiffs' motion for a preliminary injunction was heard and determined on the basis of numerous declarations and exhibits submitted by the parties and amici. ¹ In granting relief, the trial court found the term "SA" to be plaintiffs' protectable trademark and had acquired a secondary meaning. On January 6, 1977, we granted Foremost's petition for supersedeas pending appeal; on March 3, 1977, the California Supreme Court granted hearing, denied supersedeas and retransferred the cause to this court for further proceedings.

Issue

The single question presented is whether the term "SA" under the circumstances shown possesses protectable trademark significance appropriate for preliminary relief.

Defendants argue that the generic and descriptive words "sweet" and "acidophilus," cannot be exclusively appropriated from the public domain and that a mark comprised of such words cannot attain trademark significance through an acquired secondary meaning. Moreover, it is argued, the evidence supporting plaintiffs' trademark claim is insufficient and the resulting preliminary injunction constituted an abuse of discretion. Plaintiffs counterargue that the composite mark is protectable as (1) an inherently distinctive term or (2) a descriptive term with an acquired secondary meaning. We conclude that the record adequately sustains the latter argument and that interim relief was properly granted. ²

Scope of Review

[1,2] In reviewing the conflicting evidence supporting the issuance of the preliminary injunction, we must apply the test of substantial evidence and indulge all reasonable inferences in support of the findings implicit in the trial court's determination. (People v. Columbia Research Corp. (1977) 71 Cal.App.3d 607, 610, 139 Cal.Rptr. 517; City and County of San Francisco v. Evankovich (1977) 69 Cal.App.3d 41, 54, 137 Cal.Rptr. 883; Metro-Goldwyn-Mayer, Inc. v. Lee (1963) 212 Cal.App.2d 23, 27-28, 27 Cal.Rptr. 833; 6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, § 249, p. 4241.) In doing so, we look to determine whether in exercising its discretion the trial court properly balanced the respective interests and resulting inconvenience to the parties (Williams v. Los Angeles Ry. Co. (1907) 150 Cal. 592, 596, 89 p. 330) with the objective of preventing manifest injustice pending trial on the merits. (See Metro-Goldwyn-Mayer, Inc. v. Lee, supra, 212 Cal.App.2d 23, 31-32, 27 Cal.Rptr. 833.) If the evidence supports an implied finding that injunctive relief pendente lite is required in order to prevent probable irreparable injury, a reviewing court may not overturn the exercise of such discretion. (See Winfield v. Charles (1946) 77 Cal.App.2d 64, 70, 175 P.2d 69; Sun-Maid Raisin Growers v. Mosesian (1927) 84 Cal.App 485, 497, 258 p. 630; see generally 2 Witkin, Cal. Procedure (2d ed. 1970) Professional Remedies, § 80, pp. 1518-1519.) Guided by such principles, we examine the merits of the appeal.

Evidence

The documentary evidence, viewed in a light favorable to plaintiffs (Metro-Goldwyn-Mayer, Inc. v. Lee, supra, 212 Cal.App.2d 23, 27-28, 27 Cal.Rptr. 833) reveals the following:

For many years, a micro-organism known by its Latin name, LBA (a lactic acid fermenting agent), has been added to milk as an aid to digestion. When combined with the normal lactic acids, the resultant fermented milk, commonly called acidophilus milk (see Ag. Code, § 38521 ³; Webster's Third New Internat. Dict., p. 17) acquires a sour taste. In the early 1970s, Foundation research developed a new strain of LBA which when added to milk neither causes fermentation nor affects the natural or "sweet" taste of the milk. The composite term "SA" was coined and adopted as the product trademark at the commencement of promotional activities in early 1974. Efforts to register the new mark with the federal patent and trademark office and the California Secretary of State were rejected on the grounds the mark was merely a generic or descriptive term. Since the resulting milk product is not truly acidophilus milk, ⁴ federal and state regulatory agencies considered the words "SA" as simply a fanciful term, adopting the generic term "lowfat milk with lactobacillus acidophilus culture added" to officially describe the product. (See Cal. Admin. Code, tit. 3, § 407.22.) By mid-year of 1976, Gundlach had licensed 54 dairies throughout the country to use the newly developed culture process and term in marketing their milk products; nearly $3 million were expended by the licensees in promoting "SA" milk products yielding gross sales of about $10 million. In the spring of 1976, Knudsen began a promotional campaign in the Fresno area expanding to the San Francisco Bay area by mid-summer; a total of $300,000 was spent during the promotional effort. Knudsen soon experienced a significant increase in its general sales revenues. A market survey (Lampa) conducted in early October 1976, disclosed a high level of product-source recognition among consumers. In mid-August 1976, Foremost began marketing a similar milk product under its Tuttle brand in cartons (manufactured by Weyerhaeuser) prominently displaying the term "SA" in conjunction with the required generic description (see appendix). Foremost engaged in virtually no promotional advertising. Two weeks later, plaintiffs instituted the underlying litigation.

I Generic and Descriptive Terms

[3-6] Under common law principles governing mercantile trademarks, only inherently distinctive marks (i. e., fanciful, arbitrary or suggestive) used to identify a particular product are protectable immediately upon use without necessity for proof of secondary meaning. ⁵ (Blisscraft of Hollywood v. United Plastics Co. (2d Cir. 1961) 294 F.2d 694, 698-700; 1 McCarthy, Trademarks & Unfair Competition, §§ 11:2-11:3, 15:1, pp. 346-348, 514 (hereafter McCarthy).) If the mark consists of a generic or common descriptive term, however, it falls within the public domain of free usage and cannot be exclusively appropriated as a protectable trademark. (Miller Brewing Co. v. G. Heileman Brewing Co. (7th Cir. 1977) 561 F.2d 75 (cert. den.434 U.S. 1025, 98 S.Ct. 751, 54 L.Ed.2d 772); Dryice Corporation v. Louisiana Dry Ice Corporation (5th Cir. 1932) 54 F.2d 882; Skinner Mfg. Co. v. General Food Sales Co. (D.Nev.1943) 52 F.Supp. 432; Kellogg Co. v. Nat. Biscuit Co. (1938) 305 U.S. 111, 59 S.Ct. 109, 83 L.Ed. 73; Ball v. American Trial Lawyers Assn. (1971) 14 Cal.App.3d 289, 302, 92 Cal.Rptr. 228, Applebaum v. Senior (1957) 154 Cal.App.2d 371, 374, 316 P.2d 410; 3 Witkin, Summary of Cal. Law (8th ed. 1973) Personal Property, § 46, pp. 1657-1658; see generally 3 Callmann, The Law of Unfair Competition, Trademarks and Monopolies (3d ed. 1969) §§ 70.1-70.4, pp. 106-112; 1 McCarthy, §§ 11:5, 12:2, pp. 352-353, 407; 74 Am.Jur.2d, Trademarks and Tradenames, §§ 40, 46-52, pp. 727, 730-734; 47 Cal.Jur.2d, Trademarks, §§ 5-6, pp. 717-719; cf. Bus. & Prof. Code, § 14220, subd. (e)(1), and 15 U.S.C. § 1052,...