I previously wrote about an impending trial over trademark infringement and unfair competition claims asserted by Diageo North America, Inc., which owns the Canadian whisky brand “Crown Royal,” against Mexcor, Inc. and EJMV Investments, LLC., who market allegedly confusing Canadian whisky under numerous brands that use the term “Crown,” including Texas Crown Club, Florida Crown Club and South Carolina Crown Club. On December 16th, the jury reached a verdict and Diageo North America is claiming victory.
According to Nicole D’Amato, Diegeo North America’s Director and Senior Counsel, Intellectual Property:
We are pleased that the jury agreed with us that Mexcor has been confusing our consumers and diluting the strength of our Crown Royal brand, and that they will now have to change their name and packaging.
We are also gratified that the jury has backed up their verdict by awarding damages to Diageo.
We take the protection of our brands and intellectual property extremely seriously and will work diligently to protect them.
Last month I wrote about how Tito’s Vodka was the subject of two class action lawsuits alleging that its “handmade” claim was false and deceptive. Now, Maker’s Mark is the target of a nearly identical claim filed on December 5, 2014 in the U.S. District Court for the Southern District of California. As alleged in the lawsuit:
Defendant labels the whisky products it manufactures and sells as “Handmade.” However, photos and video footage of Defendant’s manufacturing process show Defendant actually employs mechanized and/or automated processes to manufacture and bottle its whisky, including but not limited to, (1) the process involved in grinding / breaking up the grains; (2) the process involved in mixing the grains with other ingredients, such as yeast and water; (3) the process involved in transferring this mixture into its fermenting location; and, (4) the process involved in bottling the whisky.
Plaintiffs further contend that “’Handmade’ and ‘handcrafted’ are terms that consumers have long associated with higher quality manufacturing and high-end products.” “As a result,” Plaintiffs, allege, Maker’s Mark “induces consumers to purchase, purchase more of, and pay more for its whisky on the basis it is of supposedly of superior quality and workmanship.”
In response, Beam Suntory, parent company of Maker’s Mark, issued a statement asserting that the “claim is without merit; we will defend this case vigorously and we are confident that we will prevail.”
The core issue, aside from whether any legal damages result from the alleged misconduct, is whether reasonable consumers who purchased a Maker’s Mark product would understand the “handmade” claim with respect to whisky as specifically excluding the “mechanized and/or automated processes” alleged in the complaint. In this regard, any production of whisky necessarily involves the use of tools other than hands, including machinery such as column and/or pot stills. So what human involvement is needed to make the finished product “handmade”? This ambiguity, also seen in “natural” claims, is precisely why this lawsuit exists.
It was my pleasure to be quoted today in FoodNavigator-USA’s article on the Truvia class action settlement. See “Settlement Fund in Stevia Deceptive Marketing Lawsuit Alleging Truvia is Not ‘Natural’ Rises to $6.1m.”
It was my pleasure today to be a guest on Bloomberg Law’s Podcast / Radio show with host June Grasso. The topic was Unilever’s lawsuit for false advertising against the egg-free spread sold by Hampton Creek under the brand name “Just Mayo.” You may listen to the complete podcast here.
Unilever owns the Hellmann’s® and Best Food’s® brands of mayonnaise. On October 31, 2014, Unilever filed suit in the U.S. District Court in New Jersey against Hampton Creek, Inc. for false advertising and unfair competition for selling an egg-free spread under the brand name “Just Mayo.” According to Unilever, the lack of any eggs in the product precludes it from being labeled as “mayonnaise” under federal regulations and consumers are further misled in this regard by the egg on the product label. As alleged in the Complaint:
“Mayo” is defined in the dictionary and in common usage as “mayonnaise.” Under federal regulations, common dictionary definitions and as consumers understand it, “mayonnaise” or “mayo” is a product that contains eggs. That ingredient does not exist in Just Mayo. By calling its vegan sandwich spread Just Mayo, Hampton Creek falsely communicates to consumers that Just Mayo is mayonnaise, when it in fact, it is not. The literally false product name is highlighted on the label, which also features a giant image of an egg … and in advertising for Just Mayo.
Finally, Unilever complains that comparisons made by Hampton Creek claiming that JUST MAYO tastes better and is superior to “real” mayonnaise, including Hellmann’s, are unsubstantiated and part of its “larger campaign and pattern of unfair competition.”
The JUST MAYO brand is a rising newcomer in this market segment. As noted by the Wall Street Journal, “Hampton Creek, founded three years ago, has raised $30 million from investors including Microsoft co-founder Bill Gates for its vision of making plant-based substitutes for common egg-based products that it says are healthier and more environmentally friendly.” The lawsuit has inspired a petition on Change.org asking Unilever to “stop bullying sustainable food companies” which has more than 16,000 supporters as of November 11th.
Although certain blogs have labeled the lawsuit frivolous, it is highly doubtful that Hampton Creek can have the claims dismissed as a matter of law. Rather, the case will likely move forward and hinge on the ultimate question of whether the “Just Mayo” label and associated marketing includes one or more false or misleading statements of fact that actual deceived or has the tendency to deceive a substantial segment of consumers and influence the purchasing decisions of consumers.
Significantly, this case underscores the dangers of creating and investing in an attractive but risky brand name. It is undisputed that the FDS’s standard of identity defines mayonnaise as “the emulsified semi-solid food prepared from vegetable oil(s),” an “acidifying” ingredient of either (1) vinegar or (2) lemon juice or lime juice, or both, and an “egg yolk-containing” ingredient. 21 C.F.R. § 169.140. Thus, by naming an egg-free product “Just Mayo,” there was always a risk that it would be accused of deceiving consumers.
UPDATE: I was just quoted in connection with this lawsuit on FoodNavigator-USA — see here.
In March 2013, Diageo North America, Inc., which owns the Canadian Whiskey brand “Crown Royal,” filed various trademark and unfair competition claims against Mexcor, Inc. and EJMV Investments, LLC. Diageo alleged that Defendants have been selling “directly-competing Canadian whisky products” under various brands “dominated by the term ‘CROWN,’ including Texas CROWN Club, Florida CROWN Club … and South Carolina CROWN Club.” Diageo alleged that this issue was compounded by Defendants’ packaging of the products in “imitative bags … violate Diageo’s rights in [its] Purple Bag mark” and “unfairly imitate the overall look and feel of Diageo’s CROWN ROYAL® product line.” In sum, Diageo claimed that consumers will mistakenly believe that [Defendants’] whiskeys are “affiliated with, sponsored by, approved by, or associated with Crown Royal” and/or that they “are regional variations or novelty line extensions of Crown Royal.”
Fast forward 20 months to the present and the case is now set to go to trial on December 3, 2014. Both parties had filed motions for summary judgment that were all rejected by the court in an October 27th Order that did not elaborate as to the reasons for the denials.
Specifically Defendants’ motions sought summary judgment (1) as to trademark dilution on the grounds that the Crown Royal trademarks were not “famous” (2) on all claims based on laches and limitations, and (3) on the trademark infringement and unfair competition claim. For its part, Diageo sought summary judgment on its trademark infringement, unfair competition, and false designation of origin claims.
The lack of any elaboration by the Court in its order likely means that it views issues of fact as precluding summary judgment on any of the motions.
With respect to the laches and limitations motion, Defendants claimed that they had been using the “CROWN” word mark on bottles in conjunction with velvet bags since 2008. Diageo’s Response disputed those facts and also focused on the doctrine of progressive encroachment, which “allows a trademark owner to tolerate de minimis or low-level infringements and still have the right to act promptly when a junior user either gradually edges into causing serious harm or suddenly expands or changes its mark.” This is an important principle to keep in mind for any brand owner. A brand owner might be at risk of a trademark infringement suit by expanding its product lines or its geographic scope. Thus, even if such a suit seems like a remote possibility when a trademark is adopted, strong consideration should be given to future events, especially if the brand might potentially be expanded or sold.