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Katalyst Beverage Corp v. Starco Impex Inc.

December 10, 2010

KATALYST BEVERAGE CORP.,
PLAINTIFF,
v.
STARCO IMPEX INC., D/B/A/ WHOLESALE OUTLET, A TEXAS LIMITED LIABILITY COMPANY, USA MILLENIUM GP, LLC A TEXAS LIMITED LIABILITY COMPANY USA MILLENIUM, LP A TEXAS LIMITED LIABILITY COMPANY M. TAHIR JAVED, AN INDIVIDUAL RESIDING IN TEXAS AND HILLSIDE BEVERAGE PACKING, LLC, A NEW JERSEY LIMITED LIABILITY COMPANY DEFENDANTS.



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

NOT FOR PUBLICATION

OPINION

This matter comes before the Court by way of Plaintiff's Motion for Temporary Restraints and a Preliminary Injunction. On November 18, 2010, this Court issued a Temporary Restraining Order (CM/ECF No. 8) as to Defendants Starco Impex, Inc. ("Starco") and Hillside Beverage Packing, LLC ("Hillside"), to expire on November 29, 2010 at 11:59 p.m, which was later extended until December 10, 2010 at 11:59 p.m. (CM/ECF No. 32). The Court has considered the submissions made in support of and in opposition to the motion and decides this matter without oral argument pursuant to Rule 78 of the Federal Rules of Civil Procedure. For the reasons set forth below, Plaintiff's Motion for a Preliminary Injunction is granted.

I. BACKGROUND

Plaintiff Katalyst Beverage Corporation ("Katalyst") is the owner of the relaxation beverage, "SIPPIN SYRUP," which has been sold by various retailers and convenience stores since May 2009. Plaintiff's Memorandum in Support of Application for Temporary Restraining Order and Preliminary Injunction ("Pl.'s Brief") at 2. In 2009, Katalyst registered the SIPPIN SYRUP mark and received U.S. Registration No. 3,726,532 for non-alcoholic beverages, namely carbonated beverages. Declaration of Ron Urban ("Urban Decl.") at Ex. A. Since its inception SIPPIN SYRUP has borne a trade dress consisting of:

"(a) a black plastic bottle with a short and narrow base, a wider cylindrical midsection, curving inward to form a tall and narrow neck, and a black plastic cap;

(b) the brand name of the product "SIPPIN SYRUP" shown in bubble lettering and displayed at an angle; (c) a circle design displayed behind the product brand name;

(d) a second geometric shape encapsulating the inner circle design; (e) progressively darker shading extending outward from the center of the label; (f) a short tag line ("Grip&Sip") displayed in close proximity to the brand name; (g) the listing of the blended items that promote relaxation (the "Proprietary Calming Blend") displayed at the bottom of the Supplement Facts; (h) the listing of ingredients displayed vertically and to the left of the Supplement Facts; and (I) all the aforesaid elements superimposed over a black label." Pl.'s Brief at 3.

SIPPIN SYRUP comes in three varieties: the original is a grape version that comes with a purple label; "Kandy," which has a pink label; and "Griptonite," which bears a green label. Urban Decl. at ¶ 13-15.

In September 2009, Katalyst entered into an exclusive U.S. distribution agreement (the "Distribution Agreement") with Starco. Urban Decl. at Ex. H. Under the Distribution Agreement, Starco was required to use its "best efforts to promote the sale of" SIPPIN SYRUP. Id. Further, the Distribution Agreement required Starco to "call on the accounts considered customers or purchasers of the merchandise and approach new accounts . . ." Id. On September 1, 2010, Katalyst cancelled the Distribution Agreement by letter, claiming that Starco had not performed its obligations under the Distribution Agreement. Urban Decl. at Ex. I. Starco maintains that it exceeded the targets laid out in the Distribution Agreement and that Katalyst's cancellation of the agreement, without notice, constitutes a breach of contract. Declaration of M. Tahir Javed ("Javed Decl.") at ¶ 2(h). This disagreement is currently the subject of two pending lawsuits in Texas state court, respectively entitled: Starco Impex, Inc. d/b/a Wholesale Outlet v. Katalyst Beverage Corporation, Ron Urban, and Gino Ciaschetti, Cause No. B188052.; and Katalyst Beverage Corporation v. Starco Impex, Inc. d/b/a Wholesale Outlet, Cause No. 10-11012. Id. at ¶ 43.

One month after the dissolution of the Distribution Agreement, in October 2010, Starco released its own relaxation beverage named "SUM SYZRRUP." Starco used the same bottle manufacturer ("Constar"), box manufacturer ("Unicorr Packaging") and bottler ("Hillside") as Katalyst to bottle and package its own product, SUM SYZRRUP. Urban Decl. at ¶ 45.

Defendants allege that they contacted a number of bottling companies before ultimately settling on Constar. Javed Decl. at ¶ 61. Defendants also maintain that the decision to bottle SUM SYZZRUP in the exact same bottle as the one used by SIPPIN SYRUP and provided by Constar was merely a consequence of cost and function. Javed Decl. at ¶ 62-70.

Plaintiff contends that the bottle and label for SUM SYZRRUP is intended to mimic the appearance of the SIPPIN SYRUP. Urban Decl. at ¶ 47. SUM SYZRRUP's label shows the brand name of the product in bubble lettering and is displayed at an angle. It bears a circle design displayed behind the product name, a second geometric shape encapsulating the inner circle design, progressively darker shading extending outward from the center of the label, a short tag line ("RELAX. Get SUM") displayed in close proximity to the brand name; a list of the blended items that promote relaxation (the "Relaxation Blend") displayed at the bottom of the list of Supplement Facts, the list of ingredients displayed vertically and to the left of the Supplement Facts, and a black border surrounding all the aforesaid elements. Id. Plaintiff further argues that the "similarities between the products are exacerbated" when the bottles are placed in coolers that emphasize the shape and color of the bottle. Id. at ¶ 48. Defendants contend that certain features of the bottle, such as the short tag line and the list of ingredients, are functional; however, Defendants fail to address the reasons for the similarities between the two bottles' other shared features. Defendants' Brief in Opposition to the Temporary Restraints and in Opposition to Plaintiffs' Application for a Preliminary Injunction ("Def.'s Brief") at 15-16.

Plaintiff made the instant application for a Temporary Restraining Order and Preliminary Injunction on November 16, 2010. (CM/ECF No. 6). On November 18, 2010, this Court issued a Temporary Restraining Order as to Defendants Starco and Hillside set to expire on November 29, 2010, but which ...


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