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J & J SNACK FOODS CORP. v. NESTLE USA

June 27, 2001

J & J SNACK FOODS, CORP, PLAINTIFF,
V.
NESTLE USA, INC., DEFENDANT. J & J SNACK FOODS, CORP., PLAINTIFF, V. THE EARTHGRAINS CO., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge:

    FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. INTRODUCTION

This Court is called upon to decide whether a preliminary injunction should issue upon the allegations of plaintiff J & J Snack Foods Corporation ("J & J") that defendants The Earthgrains Company ("Earthgrains") and Nestle USA, Inc. ("Nestle") should be enjoined from using the "BREAK & BAKE" mark, which was first registered by Schwan's Sales Enterprises, Inc. ("Schwan") in 1996, and later obtained by J & J in 1999, on their refrigerated cookie dough products. Defendant Earthgrains uses the phrase "Break 'N Bake" in connection with its refrigerated cookie dough product, and defendant Nestle uses the phrase "Just Break — & Bake" in connection with its Nestle's Toll House refrigerated cookie dough product.

There is no dispute that J & J owns the "BREAK & BAKE" mark. Therefore, the primary issues to be decided in this matter are: 1) whether plaintiff is likely to succeed in proving the trademark "BREAK & BAKE" is valid and protectable, which requires this Court to consider whether it is probable that the mark is suggestive or descriptive with secondary meaning and 2) whether plaintiff is likely to successfully show that the use of the mark by either defendant is confusing to consumers. The Court has considered the lengthy submissions of all parties, including detailed affidavits, attachments consisting of documents and depositions, several expert reports, as well as the oral arguments held on June 18, 2001.

II. PROCEDURAL BACKGROUND

Plaintiff J & J first filed a complaint against defendant Nestle on June 23, 2000, charging Nestle with trademark infringement and unfair competition in violation of federal, state, and common law. On July 12, 2000, the Complaint against Nestle was amended to include John Does I-X. Then, on December 26, 2000, plaintiff filed another action against defendant Earthgrains, charging Earthgrains with identical trademark infringement and unfair competition claims and requesting a preliminary injunction. On February 16, 2001, almost eight months after filing their original complaint against Nestle, J & J made a motion for a preliminary injunction against Nestle, seeking to enjoin its use of plaintiffs "BREAK & BAKE" mark. On March 21, 2001, this Court granted plaintiffs motion to consolidate the two proceedings for all purposes under civil action number 00-3081(JBS).

Now before this Court are plaintiffs motions for preliminary injunctive relief against defendants Earthgrains and Nestle. This Court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 1338, and under the Lanham Act 15 U.S.C. § 1051 et seq. Having read the parties' submissions, and having heard extensive argument on the motions at oral argument on June 18, 2001, this Court will now make factual findings and conclusions of law as required by Rule 65, Fed.R.Civ.P.

III. FINDINGS OF FACT

The facts of these consolidated cases are, for the most part, undisputed.*fn1

A. Plaintiff J & J

J & J, through its food service division Camden Creek, has sold frozen cookie dough with the "BREAK & BAKE" mark (see Pl.'s Br., Exs. D & E) to distributors who offer the products to fund raising organizations. (Pl.'s Br. 3.) The mark "BREAK & BAKE" is featured below the brand name, Camden Creek Bakery. (See Exs. D & E.) Plaintiff has not offered evidence of any specific advertising of the products containing the mark, and all of their sales are through fundraisers. (Nestle Opp. at 8-9.) Plaintiffs Camden Creek product is sold only to commercial distributors in the food service industry, and the ultimate consumer would not know the product because it has not been advertised to consumers, according to J & J's Vice President of Marketing, Michael Karaban. (See Valenti Decl., Ex. C, Tr. 55-11 to 56-18.) To date, plaintiffs total sales using the mark range from $1 million (Pl.'s Br. at 3) to $2 million (Pl.'s Reply Br. at 11). It is the business practice of plaintiff to guard its trademarks and plaintiff claims that it has been considering breaking into the retail supermarket refrigerated cookie dough market. (Pl.'s Br. at 3.)

In August, 1999, Nestle began selling its pre-sectioned NESTLE TOLL HOUSE cookie dough bar product. (Nestle's Opp., Ex. Q at 41-42.) Plaintiff claims that in March, 2000, defendant Nestle, through a third-party, Kelly Pioneer Group, Inc., attempted to purchase the right to use the "BREAK & BAKE" mark. (Pl.'s Br. at 4.) J & J refused to sell the right to use the "BREAK & BAKE" mark. (Id. at 5.) In August, 2000, defendant Earthgrains began selling a break and bake style refrigerated dough, labeled as "Break 'N Bake Style Cookies," which was sold under their own trademarked name, "MERICO," as well as other private supermarket labels. (See Earthgrains Opp. at 4-5 and 7, Ex. 19; Valenti Decl., Ex. E.) The labels on such products are "Break 'N Bake Style Cookies."

In early April, 2000, plaintiff discovered that Nestle was using the words "break and bake" in conjunction with their line of refrigerated chocolate chip cookie dough. (Id. at 4.) Through discovery, plaintiff learned that Nestle had been considering use of the words "break & bake," despite knowledge of the mark's prior registration and an alleged attempt to obtain the right to use the mark, as early as September, 1998. (Id. at 4; Confidential Document Packet, Ex. 1.) On April 14, 2000, J & J's counsel sent a cease and desist letter to Nestle, demanding that they stop using the "BREAK & BAKE" mark. (Id. at 6, Ex. K.) Plaintiff asserts that Nestle did not discontinue use of the words "break and bake" on its packaging.

B. Defendant Nestle

One of defendant Nestle's most successful and well known product brands is NESTLE TOLL HOUSE, which is sold in yellow packaging under the Nestle name and TOLL HOUSE logo. (Nestle Opp. at 3.) Nestle has sold refrigerated cookie dough for the last four years, primarily in the familiar "chub" wrapper,*fn2 and that product accounts for 19% of all Toll House retail sales. (Id. at 3.) The chub requires the use of a knife and/or spoon in order to measure out the proper amount of dough required for each cookie. This style of cookie dough is also commonly referred to as "slice and bake." (Earthgrains Opp. at 2.) To date, there is no trademark for the commonly used phrase "slice & bake."

Nestle indicates that, in response to customer concerns about mess and the necessity for a knife, they expanded their Toll House brand to include pre-made cookie dough, similar to the dough in the chub, but packaged instead in rectangular bar form and scored for easy separation and baking. (Id. at 4.) In August, 1999, Nestle began selling the pre-sectioned refrigerated cookie dough under the Toll House name in retail stores. (Id. at 4-5; Ex Q at 41-42.) Sometime thereafter, after conducting consumer research, Nestle added the words, "Just Break & Bake!" under an illustration of a dough piece being broken off and baked on a cookie sheet. (Id. at 5; Ex. C.)

Nestle actively began to advertise and promote the new pre-sectioned refrigerated cookie dough using television, print and coupons. (Nestle Opp. at 6-7.) A national television commercial produced by Nestle features a song set to the tune of "Shake Your Bootie" which urges consumers: "Lets bake . . . break, break, break . . . break and bake, bake your cookies, . . ., break and bake, Toll House Cookies." (Nestle Opp., Ex. J; Pl.'s Video Exhibit; Earthgrains Opp., Ex 9-B, Video of Nestle's product.) From August, 1999 through the end of 2000, Nestle spent over $20 million promoting, marketing and advertising their Nestle Toll House pre-sectioned refrigerated dough. (Nestle Opp. at 7.)

Plaintiff has not offered any evidence of actual customer confusion, such as a survey, and instead submitted only the testimony of Kelly Bordini, J & J's Director of Sales for the cookie division, who stated that she received phone calls from consumers, that is the ultimate users who baked and consumed the J & J Camden Creek Bakery product, who expressed confusion about whether the "BREAK & BAKE" cookies were made by J & J or Nestle. (Nestle's Opp., Ex. V, Tr. 44-55.) Ms. Bordini could not recall the names of such consumers or approximately how many had called her and expressed confusion and she did not keep any notes of such calls. (Nestle's Opp., Ex. V, Tr. 45-50.) Ms. Bordini admitted that she had not received any calls expressing confusion from J & J's food service customers. (Id. at Tr. 55-56.)

C. Defendant Earthgrains

Earthgrains is a private label manufacturer that sells to customers, generally grocery stores, who in turn sell products to customers in their own stores. The majority of Earthgrains consumers use the name "MERICO," a brand name and trademark owned by Earthgrains, while some retail stores use their own brand name. (See Valenti Decl., Ex. E.) Earthgrains entered the premade sectioned cookie dough market approximately eleven months after Nestle introduced its "Just Break — and Bake!" products. Earthgrains's packaging appears with the words "Break 'N Bake" prominently featured under the store or private label cookie name, with the word "Style" following in smaller letters. (See Valenti Decl., Ex. E, Exemplars of various Earthgrains packages). Earthgrains's product, like Nestle's, is a rectangular bar of cookie dough, approximately five inches long, four inches wide, and one inch thick, that is partially scored both horizontally and vertically so that the bar is divided into twenty one-inch cubes. Both Nestle's and Earthgrains's dough bars are packaged in a soft bag-like package.

J & J's product is not a bar of dough that is partially scored. Rather, J & J's product is packaged in a box as individual, separate, puck-like*fn3 round portions of cookie dough that are described as "kissing" or pressed together, which must be kept frozen. Each box contains dough for forty-eight one ounce cookies, which is packaged in two large sheets of twenty-four dough pucks each. (Pl.'s Motion, Ex. E.) Rather than forming a dough bar similar to the Nestle and Earthgrains products, the J & J product is best described as round cookie dough pucks, partially joined together at the edges in a frozen sheet. When the consumer uses J & J's product, they must detach the number of frozen dough pucks they desire and break each puck apart before placing them on a baking sheet in the oven.

IV. CONCLUSIONS OF LAW

The plaintiff has filed motions for preliminary injunctions against Earthgrains and Nestle, to stop each defendant from using words that allegedly infringe plaintiff's "BREAK & BAKE" mark on the packaging and advertising for their refrigerated cookie dough products. Although the actions were commenced separately, due to the similar issues of fact and law and the common plaintiff, they were consolidated for all purposes.

A. Preliminary Injunction Standard

The decision of whether to grant a preliminary injunction is within the discretion of the district court. United States v. Price, 688 F.2d 204, 210 (3d Cir. 1982). When deciding a motion for a preliminary injunction under Rule 65(a), a district court must consider four factors:

(1) whether the movant has shown a likelihood of success on the merits; (2) whether the movant will be irreparably injured by denial of relief; (3) whether granting preliminary relief will result in even greater harm to the nonmoving party; and (4) whether granting the preliminary relief will be in the public interest.

Times Mirror Magazines, Inc. v. Las Vegas Sports News, L.L.C., 212 F.3d 157, 160 (3d Cir. 2000), cert. denied, 531 U.S. 1071, 121 S.Ct. 760, 148 L.Ed.2d 662 (2001). An injunction, however, is an extraordinary remedy that should only be granted in limited circumstances. AT & T v. Winback & Conserve Program, 42 F.3d 1421, 1426-27 (3d Cir. 1994). The Third Circuit has held, however, that a district court shall grant such relief in trademark infringement cases when a plaintiff carries its burden on each of the aforementioned factors. See Opticians Ass'n of Am. v. Independent Opticians of Am., 920 F.2d 187, 191 (3d Cir. 1990).

1) Likelihood of Success on the Merits

Plaintiff J & J alleges that both Earthgrains's and Nestle's use of the "BREAK & BAKE" mark constitutes federal trademark infringement and unfair competition under §§ 32(1) and 43(a) of the Lanham Act, 15 U.S.C. § 1114(1)(a) and 1125(a) (Counts I and II), common law trademark infringement and unfair competition (Counts III and IV), and unfair competition under New Jersey statutory, N.J.S.A. 56:4-1 et seq., and common law (Count V). The parties have focused their briefing on the federal claims under the Lanham Act, 15 U.S.C. § 1051 et seq., and this Court will evaluate plaintiffs likelihood of success on those counts first.

a.) Federal Claims under the Lanham Act

"`The law of trademark protects trademark owners in the exclusive use of their marks when use by another would be likely to cause confusion.'" Commerce Nat'l Ins. Servs. v. Commerce Ins. Agency, Inc., 214 F.3d 432, 437 (3d Cir. 2000) (quoting Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 462 (3d Cir. 1983)). Trademark infringement claims under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1),*fn4 and federal unfair competition claims under § 43(a)of the Lanham Act, 15 U.S.C. § 1125(a),*fn5 are considered using the same standard. See Advance Magazine Publrs. v. Vogue Int'l 123 F. Supp.2d 790, 795 (N.J. 2000) (citing A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 201-11 (3d Cir. 2000)). A claim of trademark infringement or unfair competition is established when the plaintiff proves that: (1) it owns the mark; (2) its mark is valid and legally protectable; and (3) the defendant's use of the mark to identify its goods or services is likely to create confusion concerning the origin of those goods or services. Commerce, 214 F.3d at 437; see Opticians Ass'n of Am. v. Independent Opticians of Am., 920 F.2d at 192.

There is no dispute in this case that J & J owns the "BREAK AND BAKE" mark, originally registered by its predecessor Schwan on January 16, 1996. (See Nestle's Opp. at 11.)*fn6 Therefore, the Court will focus its inquiry on whether plaintiff is likely to succeed in showing that the mark is valid and legally protectable and whether the use by each defendant is likely to create confusion.

i.) Validity and Protectability of Mark

If the mark at issue in an infringement case is federally registered and has become incontestable, then validity and protectability are proved as a matter of course. See Commerce, 214 F.3d at 438. If, however, a mark is registered, but has not achieved incontestability,*fn7 then "`validity depends on proof of secondary meaning, unless the unregistered or contestable mark is inherently distinctive.'"*fn8 Commerce, 214 F.3d at 438 (quoting Ford Motor Co. v. Summit Motor Prods., 930 F.2d 277, 292 (3d Cir. 1991)). Plaintiff concedes that the "BREAK & BAKE" mark is not incontestable, but notes that it would have achieved such status in January, 2001, had the instant suits not been filed to halt the alleged infringement by defendant. (See Pl.'s Br. at 9 n. 3; Pl.'s Mot. Prelim. Inj. Earthgrains at 5 n. 1.)

Trademark law recognizes varying types of marks, typically grouped into four categories: (1) generic; (2) descriptive; (3) suggestive; and (4) arbitrary or fanciful. A & H Sportswear, 237 F.3d at 221-22. The "suggestive" and "arbitrary and fanciful" categories are deemed inherently distinctive and therefore valid and legally protectable. See Fisons Horticulture, 30 F.3d at 472 (citing Ford Motor, 930 F.2d at 291). Plaintiff argues that the "BREAK & BAKE" mark is suggestive or, at a minimum, descriptive with secondary meaning and that it is therefore protectable. Defendants challenge the protectability of the mark, arguing that the mark is generic or, at most, descriptive with no secondary meaning.

(1) Whether the Mark is "Generic"

First, the Court will consider whether the mark "BREAK & BAKE" is generic, as argued by defendants Nestle and Earthgrains. A mark is "generic" when it is a common descriptive name for a class of products, not connected to any specific brand, and has not been afforded trademark protection. See Harlem Wizards Entm't Basketball, Inc. v. NBA Prop., Inc., 952 F. Supp. 1084, 1092 (N.J. 1997). The Third Circuit has discussed what makes an identifier generic:

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 ...

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