Feud Over CUTIES Trademark the Subject of Pending Arbitration

One of the best examples of successfully branding produce is CUTIES brand clementines and mandarins.  That valuable trademark — with approximately $300 million in sales over the past decade — is co-owned by Sun Pacific and Paramount Citrus.  Excellent articles in The Packer and Wall Street Journal detail a feud between the co-owners.

The most publicized aspect of that dispute is the result of Sun Pacific sub-licensing rights in the CUTIES trademark to its wholly-owned subsidiary Califia Farms LP in connection with the sale and marketing of bottled juice.  That action ultimately triggered a March 2012 complaint filed by Paramount Citrus against Califia Farms based on the contention that certain conditions attached to Paramount Citrus’ initial consent to that sublicense had not been met and therefore continued use of the CUTIES mark by Califia Farms constituted trademark infringement.  A copy of that Complaint can be found here.

Califia Farms countered by filing a motion to compel arbitration of the dispute based on a broad arbitration provision in a 2008 Master Agreement signed by Sun Pacific and Paramount Citrus.  In April 2012, presumably in light of the motion to compel, Paramount Citrus voluntarily dismissed its complaint without prejudice and the dispute is now part of a larger proceeding before the American Arbitration Association.

According to the Wall Street Journal, the trademark dispute is part of a larger and long-simmering disagreement between Sun Pacific, held by Berne Evans III, and Paramount Citrus, a unit of Roll Global LLC  (along with Fiji Water and POM Wonderful) which is closely held by Stuart and Lynda Resnick.  The Wall Street Journal notes that a key disagreement centers on escalating advertising costs resulting from an aggressive marketing strategy by the Resnicks but opposed by Evans.  According to Evans, “advertising expenses [have risen] to 26 cents per box of Cuties in the latest season, up from 8 cents a few years ago.”  Mr. Evans also “hired a high-powered consulting firm to help evaluate the group’s advertising costs” and they “concluded that the group was actually losing money on the campaign” despite a dramatic increase in sales.

On the other hand:

Adding to the tension is an idea Mr. Evans hatched after a freeze forced some of the fruit to mature smaller.  Mr. Evans devised “Baby Cuties,” as a trademark with a logo that mimics the original Cuties (a smiling tangerine with an open zipper on the peel) wearing a bonnet and with a pacifier in its mouth. Selling the fruit exclusively at Wal-Mart Stores, the group made an “extra $2 or $3 million,” Mr. Evans says, a better profit than turning them into juice.  The Resnicks didn’t approve of the Baby Cuties, according to Mr. Evans and other citrus growers, out of concern it would undercut the main brand.

These other disputes are also evidently part of the pending arbitration.  Moreover, the 2008 Master Agreement expires in 2014 so all of the foregoing are likely part of the complicated negotiations for what has, to date, been an extremely beneficial relationship.

See the Wall Street Journal’s article here and The Packer’s article here.

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