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A.J. Canfield Co. v. Honickman

argued: August 19, 1986.

A.J. CANFIELD COMPANY, A CORPORATION, APPELLANT
v.
HONICKMAN, HAROLD, AN INDIVIDUAL AND CONCORD BEVERAGE COMPANY, A CORPORATION, APPELLEE



On Appeal form the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 85-5085.

Author: Becker

Before: BECKER, MANSMANN, Circuit Judges and TEITELBAUM, District Judge*fn*

Opinion OF THE COURT

BECKER, Circuit Judge.

This appeal concerns trademark rights in the phrase "Diet Chocolate Fudge Soda," the name of a drink with which Plaintiff-Appellant, A.J. Canfield Co. ("Canfield"), has recently achieved meteoric success. In the district court, Canfield sought a preliminary injunction barring Defendant Concord Beverage Co. ("concord") from using this name in connection with a soft drink Concord sells in Pennsylvania, New Jersey, and New York. The district court refused to issue the injunction, A.J. Canfield Co. v. Concord Beverage Co., 629 F. Supp. 200 (E.D. Pa. 1985), and Canfield appeals. 28 U.S. C. § 1292(a)(1).

We must decide whether the designation "chocolate fudge" as applied to diet soda deserves unfair competition. 15 U.S.C. § 1125(a) (Section 43(a) of the Lanham Act). The term is protectable if it is suggestive or if it is descriptive and is buttressed by proof of secondary meaning. The designation is unprotectable if it is generic or if it is descriptive but lacks sufficient secondary meaning. If the mark is protectable, we must also decide its geographic reach.

At the present stage of the case, we hold the designation "chocolate fudge" for diet soda generic, hence unprotectable, on the basis of two essential considerations. First, as the district court justifiably found, the term "chocolate fudge" denotes a particular full and rich chocolate flavor, that distinguishes Canfield's product from plain chocolate sodas. Second, on the basis of the present record, it appears difficult if not impossible for a competing producer to convey to the public that its product shares this functional flavor characteristic without using the words "chocolate fudge."

Unlike Athena, however, this conclusion does not emerge full grown from the existing jurisprudence. Indicative of this legal lacuna is the fact that three distinguished district judges have considered the level of inherent distinctiveness of chocolate fudge soda and have arrived at disparate conclusions. See A.J. Canfield Co. v. Vess Beverages, Inc., 612 F. Supp. 1081 (N.D. Ill. 1985) (Shadur, J.), aff'd, 796 F.2d 903 (7th Cir. 1986) (finding "a reasonable basis for considering term suggestive although even greater basis for holding it merely descriptive); Canfield v. Concord Beverages Co. (Scirica, J.) (holding term descriptive); Yoo-Hoo chocolate Beverages Corp. v. A.J. Canfield Co., 229 U.S.P.Q. (BNA) 653 (D.N.J. 1986) (Sarokin, J.) (finding term generic), appeal stayed per stipulation, App. No. 86-5584 (3d Cir. Oct. 17, 1986).

The jurisprudence of genericness revolves around the primary significance test, which inquires whether the primary significance of a term in the minds of the consuming public is the product or the producer. The primary significance test, however, cannot be applied until after we have decided the question that lies at the core of this case: whether the relevant product category or genus for purposes of evaluating genericness is chocolate soda or chocolate fudge soda. In order to resolve this initial question, we must develop a test that is congruent with general principles of trademark law and the primary significance test. We conclude that when a producer introduces a product that differs from an established product class in a significant, functional characteristic, and uses the common descriptive term of that characteristic as its name, that new product becomes its own genus, and the term denoting the genus becomes generic if there is no commonly used alternative that effectively communicates the same functional information.

Because, on the present record, Chocolate Fudge Soda appears to fit our test for a generic term, and because generic designations are not protectable under trademark law, we will affirm the order of the district court denying the preliminary injunction.

I. FACTS AND PROCEDURAL HISTORY

Canfield, a medium-sized bottler located in the Chicago area, has produced "Canfield's Diet Chocolate Fudge Soda" since the early 1970's and until recently has made sales almost exclusively in the Midwest. On January 13, 1985, however, Bob Greene, a nationally syndicated columnist of the Chicago Tribune, wrote an article about the product entitled "Heaven For Dieters: Two Calorie Fudge Soda" that dramatically expanded the market for Canfield's diet chocolate fudge soda. "To say it tastes like chocolate is to insult it," wrote Greene. "Taking a sip is like biting into a hot fudge sundae . . . " The column went on to explain that Canfield had combined "the proper combination of chemicals to precisely duplicate the taste of chocolate fudge without the use of chocolate," so that the soda helped Greene satisfy his craving for chocolate and yet maintain his diet.

The column set off a splurge of national publicity, including reports on television, by CNN News Broadcast, CBS Morning News, Good Morning America, and PM Magazine, and report in print media by The New York Times, Time Magazine, The Philadelphia Daily News, The Washington Post, and People Magazine. Exploiting this publicity, Canfield increased its advertising and, by mid-February, had begun shipments to various East Coast markets. The publicity encouraged bottlers around the county to seek permission to produce Canfield's soda, and Canfield eventually granted eleven licenses, including a few licenses to bottlers in Concord's marketing areas. One of those licensees, located in the Philadelphia area, began to distribute Canfield's soda sometime in late May 1985, selling 50,000 cases in the first week. Exactly how much diet chocolate fudge soda Canfield sent to the central east coast before this time is unclear, but the amount is certainly small.

Around this date and a decade after first marketing the soda, Canfield applied for the first time to the U.S. Patent and Trademark Office for protection of the designation "chocolate fudge" under the Lanham Act. That application was denied on May 23, 1985, on the decision of an examining attorney who found that "chocolate fudge" designates a flavor and as such is incapable of distinguishing the source of the goods. The examiner apparently considered chocolate fudge as applied to diet soda generic.

Concord is a medium-sized bottler on the East Coast, producing both national "name" brands under license and a line of beverages under its housemark "vintage." Shortly after the Greene column appeared, and with the encouragement of its customers, Concord asked Canfield for a license to market diet chocolate fudge soda. The parties dispute whether Concord sought to license the entire name "Canfield's Diet Chocolate Fudge Soda" or only the words "chocolate Fudge Soda." Failing to receive a positive response, Concord quickly produced its own diet chocolate fudge soda, which it successfully marketed under its "vintage" mark. The can design of the resulting soda strongly resembled Canfield's design; on both cans the names Canfield's or Vintage appear in large, diagonal, red letters and the term chocolate fudge soda appears in smaller, diagonal, brown letters.*fn1 Concord began distributing Vintage Diet Chocolate Fudge Soda sometime late April or May, 1985, at approximately the same time that Canfield's Philadelphia licensee began introducing Canfield's

On August 30, 1985, Canfield commenced this suit in the United States District Court for the Eastern District of Pennsylvania claiming that Concord's use of the phrase "diet chocolate fudge soda" constituted trademark infringement and unfair competition, in violation of state common law and § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), which governs unregistered trademarks. On September 3, 1985, Canfield moved for a preliminary injunction. After receiving evidence and hearing arguments, the district court filed a comprehensive and thoughtful opinion, denying the request for an injunction.

The district court's denial of the preliminary injunction flowed from its determination that Canfield had not demonstrated a likelihood of success on the merits. The court relied exclusively on federal law because Canfield had failed to pursue its state law claims in its briefs or at oral argument and because, the court noted, federal courts presume an identity of standards under federal and state law in the absence of any suggestion by the parties to the contrary.

Analyzing the merits, the court first considered the designation's level of inherent distinctiveness. It found the term "chocolate fudge soda" descriptive of the flavor of the soda but concluded that the term was not the name of the class of product, which the court considered to be diet chocolate sodas. Noting that a descriptive mark can acquire protected trademark status through the acquisition of "secondary meaning," the court then considered whether "chocolate fudge soda" had acquired secondary meaning in Concord's geographic market area. Relying on our decision in Natural Footwear, Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383 (3d Cir.), cert. denied, 474 U.S. 920, 106 S. Ct. 249, 88 L. Ed. 2d 257 (1985), the court held that secondary meaning cannot exist in a market that plaintiff has not penetrated. Finding insufficient evidence of actual sales, growth trends, percentage of sales customers, or amount of product advertising to demonstrate market penetration, the court found that Canfield had not established secondary meaning in Concord's area.

The court then considered claims that Canfield had established secondary meaning in the term chocolate fudge soda in Chicago and thus could "prevent defendants from intentionally adopting the same or similar mark." In its action for trademark infringement in Chicago against Vess Beverages, Inc., Canfield had gained a preliminary injunction based in part on its advertising and sales in the Midwest and in part on a study that purported to demonstrate identification of the term "chocolate fudge soda" with Canfield.*fn2 The court assumed, without finding, that such secondary meaning existed in the Chicago area but still rejected Canfield's claim. First, the court rejected Canfield's claim based on the "secondary meaning in the making" doctrine, holding that doctrine inimical to the concept of secondary meaning and rejected by all but a few New York courts whose only endorsement was in dicta.*fn3 Next, the court rejected the idea that Concord's knowledge of Canfield's designation could itself support an inference that secondary meaning had spread to Concord's area. finally, the court rejected claims based on the "Tea Rose-Rectanus" doctrine, holding that intentional copying in this context did not constitute a "bad faith" intention to trade on Canfield's goodwill.*fn4

In a final section of its opinion, the district court held that even if Canfield had proven a valid trademark, it would still have had to demonstrate a likelihood of confusion. The court dismissed any suggestion that the similar trade dress contributed to confusion, finding insufficient proof of market penetration to demonstrate confusion and finding defendant's intentional copying "mitigated by the uniformity of packaging in the soft drink industry." 629 F. Supp. at 213 n.7. The court also found a dearth of evidence showing actual confusion. Accordingly, the court found that Canfield had not shown a likelihood of confusion.

On appeal, Canfield renews its contention that "chocolate fudge soda" is suggestive or, if it is descriptive, that it at least has acquired trademark statutes through secondary meaning in the Chicago area. Canfield claims that the district court erred in requiring it to establish secondary meaning in Concord's area because of a claimed rule of trademark law that a junior user's knowledge of a senior user's designation, even if descriptive, automatically entitles the senior use to enjoin the junior user from using the mark. Canfield also claims a more limited rule that Canfield need not establish secondary meaning in Concord's market areas because (1) Canfield has a valid mark in Chicago, (2) Concord knew of the mark, and (3) concord sells in areas of Canfield's natural expansion. In support of these points, Canfield asserts that the district court erred in focusing on "bad faith" because [it contends] the relevant question is only whether the junior user knew of the senior user's use of the mark.

Canfield also claims that the district court applied the wrong tests to determine whether chocolate fudge soda had acquired secondary meaning ni Concord's area by focusing on evidence of market penetration. Canfield claims that the "fame of a mark can extend beyond its actual selling market" and may constitute secondary meaning, and Canfield argues that we should infer secondary meaning from Concord's intentional copying, from product requests by East coast chain stores, from East Coast advertising, and from the phenomenal sales of 50,000 cases of chocolate fudge soda in the first week of sales in the Philadelphia area. finally, Canfield disputes the district court's suggestion that a finding of secondary meaning in the term chocolate fudge in Concord's area would not itself demonstrate likelihood of confusion, citing our decision in Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir. 1983).*fn5

In response, Concord renews its claim that chocolate fudge soda is generic and therefore unprotectable.*fn6 Concord otherwise supports the rulings and findings of the district court.

Because we agree with Concord that the designation "chocolate fudge" is generic, we do not reach the claims that predominated in the district court ...


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