In McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, 511 F3d 350, 85 USPQ2d 154 (3rd Cir. 2007), Plaintiff McNeil Nutritionals, LLC (“McNeil”) introduced Splenda®, the first artificial sweetener in the United States made from sucralose, in September 2000. Sales of Splenda® grew more than tenfold in just six years, from approximately $32 million in 2001 to approximately $410 million in 2006. Splenda® is sold in boxes of individual packets of 100 and 200-count sizes. The boxes are oriented horizontally, with a yellow background. The trade name “Splenda” appears at the top-center of the front of the boxes, in italicized blue lettering, and is surrounded by a white oval-shaped cloud. On the front, lower-right side of the boxes, there is a photograph of a white cup of coffee and saucer, with an individual Splenda® packet resting on the saucer. On the front, left side of the boxes, there is a photograph of a glass and pitcher of iced tea. On the bottom-left corner is a circular element that contains the blue all-caps text, “Made from Sugar, Tastes Like Sugar.” McNeil also sells granular Splenda® in vertically-oriented bags. The front of the Splenda® bag is exactly the same as that of the Splenda® boxes, except that it displays different physical props: a piece of pie on a plate, behind which are a bowl of cereal and a scoop containing granular Splenda®.
Defendant Heartland Sweeteners, LLC (“Heartland”) manufactures and packages a number of store-brand artificial sweetener products for retailers including Giant, Stop & Shop, Tops, Food Lion, Safeway, Albertson’s, and Wal-Mart. Giant, Stop & Shop, and Tops are all owned by Ahold, and the packages of the store-brand sucralose products sold by these stores (the “Ahold products”) are identical except that each packaging contains that respective store’s name and/or logo. The Ahold products come in 100 and 200 count sizes, with a yellow background and either blue or white lettering. The product name “Sweetener” appears at the top-center of the front of the boxes, in italicized blue font. The product name is outlined in white, but not by a cloud. On the lower-right corner is a photograph of a white cup of coffee and saucer, a glass of lemonade, and several fruits further off to the right side. There is a white rectangular border surrounding the front of the boxes. The store logo (regardless of the store name) appears just above the product name. The Ahold products are sold as granular sucralose in vertically-oriented bags. The front of the vertically oriented bags are exactly the same as the front of the boxes of the Ahold products, except that they display different physical props: a slice of cheesecake on a plate, a bowl of cereal with raspberries, and a white cup of coffee and saucer.
The Food Lion store-brand 100 count-box of individual sucralose packets is oriented horizontally, with a yellow background and either blue or black lettering. The product name “Sweet Choice” appears on the bottom of the front of the box, in italicized blue font. The product name is not surrounded by a cloud, the front of the box contains a vertical design element that divides it into two portions, and the left portion includes the Food Lion logo (black) and store name (black) at the top.
The Safeway store-brand boxes of individual sucralose packets are oriented horizontally, come in 100 and 200-count sizes, have yellow backgrounds, and mostly blue lettering. The product name “Sucralose” appears on the bottom-left of the front of the boxes, in italicized blue font. The name is not surrounded by a cloud. The front of the box contains a white S-shaped Safeway logo that visually divides the front of the box into two portions.
On December 5, 2006, McNeil filed a seven-count complaint against Heartland under federal and state law, seeking relief for trade dress infringement and for trademark infringement of the slogan “Made from Sugar, Tastes Like Sugar.” On December 14, 2006, McNeil filed a motion for preliminary injunction. On May 21, 2007, the District Court denied the motion with respect to all of the allegedly infringing packages in a written memorandum and order. McNeil only appealed the trade dress infringement issue.
On appeal, the Third Circuit found that the District Court correctly found that Heartland’s Food Lion and Safeway store-brand boxes did not infringe the plaintiff’s trade dress packaging. However, the District Court erred in finding that Heartland’s Ahold products did not infringe the plaintiff’s trade dress packaging.
The Lanham Act, 15 U.S.C. §1125(a), establishes a cause of action for trade dress infringement. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 28-29 (2001). Trade dress refers to the “design or packaging or a product which serves to identify the product’s source.” Shire U.S. Inc. v. Barr Labs. Inc., 329 F.3d 348, 353 (3d. Cir. 2003). It is “the total image or overall appearance of a product, and includes, but is not limited to, such features as size, shape, color or color combinations, texture, graphics, or even a particular sales technique.” Rose Art Indus., Inc. v. Swanson, 235 F.3d 165, 171 (3d Cir. 2000). To establish trade dress infringement under the Lanham Act, a plaintiff must prove that (1) the allegedly infringing design is non-functional; (2) the design is inherently distinctive or has acquired secondary meaning; and (3) consumers are likely to confuse the source of the plaintiff’s product with that of the defendant’s product. Shire US, 329 F.3d at 353.
The likelihood of confusion between two trade dresses is a question of fact. A & H Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 166 F.3d 191, 194 (3d Cir. 1999). The Third Circuit applies and weighs the following 10 “Lapp” factors to determine whether there is a likelihood of confusion: (1) the degree of similarity between the plaintiff’s trade dress and the allegedly infringing trade dress; (2) the strength of the plaintiff’s trade dress; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (4) the length of time the defendant has used its trade dress without evidence of actual confusion arising; (5) the intent of the defendant in adopting its trade dress; (6) the evidence of actual confusion; (7) whether the goods, though not competing, are marketed through the same channels of trade and advertised through the same media; (8) the extent to which the targets of the parties’ sales efforts are the same; (9) the relationship of the goods in the minds of consumers because of the similarity of function; and (10) other facts suggesting that the consuming public might expect the plaintiff to manufacture a product in the defendant’s market, or that the plaintiff is likely to expand into that market. Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir. 1983); Freedom Card, Inc. v. JP Morgan Chase & Co., 432 F.3d 463, 471 (3d Cir. 2005).
On appeal were the District Court’s findings in relation to the first, third, and sixth Lapp factors.
First Lapp Factor: Degree of Similarity Between McNeil’s Trade Dress and Heartland’s Various Trade Dresses
As noted again by the Third Circuit, “the single most important factor in determining likelihood of confusion is trade dress similarity.” A & H Sportswear, 237 F.3d at 216. Here, the Third Circuit did not find clear error in the District Court’s finding that the defendant Heartland’s Food Lion and Safeway products are not substantially similar enough to weigh the first Lapp factor in favor of McNeil. The court reasoned that “forceful and distinctive design features should be weighed more heavily because they are more likely to impact the overall impression.” The Third Circuit stated that the most important difference is that the trade name “Splenda” is not present on the Food Lion and Safeway packages, while the Food Lion and Safeway logos are present on the Food Lion and Safeway packages and are well-known to consumers.
Furthermore, the store designs are represented prominently on their respective packages. For example, in the Food Lion package, a vertical design element runs through the front of the package, visually dividing it between a dark yellow bar and a light yellow canvas, in a way found on other Food Lion store-based products. These features distinguish the Food Lion package from any feature present on the Splenda® package. Moreover, the Food Lion package contains the product name “Sweet Choice” instead of “Splenda” and the product name is not surrounded by a white cloud. The Safeway packages contain an “S”-shaped element that divides the entire front of the box, and its presence on other Safeway store-brand products renders it well-known as a store-specific signature. Also, the Safeway packages contain the name “Sucralose” instead of “Splenda,” the product name is not surrounded by a white cloud, and the circular element with the slogan “Made From Sugar, Tastes Like Sugar” is missing.
However, the Ahold products are substantially similar enough to McNeil’s trade dress to weigh the first factor in favor of McNeil with respect to the Ahold products. The store name and logo are not displayed prominently on the Ahold packaging. In this sense, the Food Lion and Safeway packages are much closer to the black and white diagonally-striped packages which prominently displayed the logo “Venture” in Conopco, Inc. v. May Department Stores Co., 46 F.3d 1556 (Fed. Cir. 1994) (in which the Federal Circuit held that the packages did not infringe a competitor’s trade dress) because a store-specific signature is prominently displayed on them. Second, the Ahold product name “Sweetener” is placed at the top of the front of the packaging, just like “Splenda,” rather than at the bottom.
McNeil further argued that the yellow packaging used by all of the allegedly infringing products weighed the first Lapp factor in favor of infringement for all of the allegedly infringing products. However, the District Court considered the yellow packaging in its analysis of the first Lapp factor, and correctly concluded that the yellow packaging alone did not outweigh the overall different impressions of the packages. The Third circuit further reasoned that just because a consumer sees yellow packaging in the sugar aisle does not mean that she believes McNeil or Splenda® to be the source, especially because consumers are generally aware of the use of pink and blue by manufacturers other than those of Sweet N’ Low and Equal, respectively.
Third Lapp Factor: Degree of Consumer Care
McNeil argued that the District Court erred in attributing a heightened level of care to consumers of no-calorie sweeteners. “Where the buyer class consists of both professional buyers and consumers, the standard of care to be exercised by the reasonably prudent purchaser will be equal to that of the least sophisticated consumer.” Versa Products Co. v. Bifold Co., 50 F.3d 189, 204-05 (3d Cir. 1995). According to McNeil, since (1) the products at issue cost on average between $4.00 and $5.00, and (2) the least sophisticated consumer in the buying class is not buying sucralose for health reasons and thus is not likely to exercise heightened care and attention, the District Court should have weighed this factor in favor of McNeil. However, the Third Circuit held that the District Court did not err in defining the consumer class as consisting mostly of people who buy sucralose to improve their health. The District Court relied on evidence that the ordinary consumer class in this case consisted more of health-conscious people than non-health-conscious people. The reasonably prudent consumer in this case exercises some heightened care and attention when buying sucralose because her health considerations typically override the product’s low cost.
Sixth Lapp Factor: Evidence of Actual Confusion
McNeil argued that the District Court erred in holding that McNeil failed to produce any evidence of actual consumer confusion because McNeil produced testimony of Ms. Grossman about her actual confusion in purchasing Splenda®. However, the District Court considered Ms. Grossman’s own admissions, including that she is a speed “surgical strike” shopper, that she is not a comparison shopper, that her yearly household income exceeds $300,000, that she did not look at the prices on the day she made her inadvertent purchase, and that she was not wearing her reading glasses that day, and correctly concluded that Grossman was not representative of the kind of shopper ordinarily purchasing sucralose. Further, McNeil failed to produce any other evidence of actual confusion.
The District Court Clearly Erred in Not Finding a Likelihood of Confusion as to the Packages for Which It Weighed the First Lapp Factor in McNeil’s Favor
While affirming the District Court’s decision in relation to Food Lion and Safeway, the Third Circuit found that the District Court committed clear error by not finding a likelihood of confusion regarding the Ahold products because the District Court found the first, second, seventh, eighth, and ninth Lapp factors in favor of McNeil with respect to the Ahold products (and found the third, fourth, and tenth factors in favor of neither party). The District Court did not adequately heed the Third Circuit’s oft-repeated statement that “[t]he single most important factor in determining likelihood of confusion is [degree of] similarity.” The District Court incorrectly reasoned that producers of store-brand products would effectively acquire per se immunity as long as the store brand’s name or logo appears somewhere on the allegedly infringing package, even when the name or logo is tiny. Here, the Ahold products did not prominently display the names of stores on the packaging. As such, the Third Circuit affirmed the District Court’s denial of preliminary injunctive relief as to the Food Lion and Safeway products, but reversed the denial as to the Ahold products. McNeil demonstrated a likelihood of success on the merits for purposes of preliminary injunctive relief with respect to the third element of trade dress infringement, i.e., a likelihood of confusion. The Third circuit remanded the case to the District Court to consider whether McNeil can establish a likelihood of success on the remaining elements of trade dress infringement under the Lanham Act, as well as the remaining factors for preliminary injunctive relief.