Returning to the debate on whether Intellectual Property is granting extended monopoly profits, thereby fueling the profit margins driving the stock market, here is a very non-Internet example of the phenomenon. It's a suit by Pepperidge Farm to prevent any goldfish-shaped cracker competition.
We are rapidly evolving into a system of monopoly niches, where "competition" means only the right to create a new niche, not the right to enter an established market. (And note that trademark, unlike patent, has no time limits.)
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Pepperidge Farm Wins Goldfish War Nabisco's fish cracker hook with Nickelodeon's 'CatDog' foiled in N.Y. court
By Daniel Wise New York Law Journal September 2, 1999
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Pepperidge Farm won another victory earlier this week in its war with Nabisco over which of the giant baking companies has the right to market a goldfish-shaped, cheddar cheese cracker.
The victory came Monday when the U.S. Court of Appeals for the Second Circuit sustained a lower court ruling that Pepperidge Farm was entitled to an injunction under the federal Trademark Dilution Act, 15 U.S.C. §1125(c).
Nabisco had plans under a promotion agreement with the Nickelodeon Television Network to begin marketing a bite-sized goldfish cracker starting last February. Nabisco planned to market a box of crackers trading on the recognition that the Nickelodeon cartoon show, "CatDog," has in the children's market.
The CatDog character is a Sphinx-like creation that is half cat and half dog. Given its dual nature, CatDog has two favorite foods: bones for the dog half and fish for the cat half.
The Nabisco crackers were to be a mixture of crackers with 50 percent of every box consisting of CatDog shaped crackers, 25 percent shaped as bones and 25 percent shaped as fish.
In contrast, Pepperidge Farm has been marketing its Goldfish crackers since 1962, and in 1994 launched an aggressive advertising campaign aimed at children. According to the Second Circuit's opinion, which was written by Judge Pierre N. Leval, Pepperidge Farm's Goldfish generate greater sales in terms of dollars than any other cheese snack cracker in America.
In Nabisco Inc. v. PF Brands Inc., No. 99-7149, Judge Leval agreed largely with Southern District Judge Shira A. Scheindlin's listing, and analysis, of the relevant factors in determining dilution disputes. He also rejected Nabisco's claims that Pepperidge Farm was legally barred from claiming the protection of the anti-dilution statute because it had a potential trademark infringement remedy and because of a Fourth Circuit precedent requiring it to make a showing of actual harm.
NO ELECTION REQUIRED Nabisco had argued that the anti-dilution statute was not intended to apply to competing products, citing examples listed in the new law's legislative history. In passing the statute, which provides for injunctive relief but not damages, the lawmakers offered several hypothetical examples of the type of abuses the statute was designed to prevent: Buick aspirin, Schlitz varnish and Kodak pianos.
Judge Leval rejected Nabisco's argument, pointing out the closer the relationship between the competing products "the greater the likelihood of both confusion and dilution."
Nor did the fact that Pepperidge Farm might have a claim for trademark infringement mean that the dilution statute was unavailable to it, Judge Leval wrote.
Under the trademark statute, a plaintiff must show actual consumer confusion to win relief, an element that is not required under the anti-dilution statute. In fact, Judge Scheindlin denied Pepperidge Farm relief on grounds of trademark infringement because it was unable to show actual consumer confusion.
In rejecting Nabisco's claim that Pepperidge Farm had to chose between the infringement and anti-dilution remedies, Judge Leval wrote: "The fact that other remedies may be available to prevent a perceived ill does not seem to be sufficient reason to construe a statute as not reaching circumstances that fall squarely within its words."
Judge Leval also rejected the Fourth Circuit's requirement in Ringling Bros.-Barnum & Bailey v. Utah Division of Travel Development, 170 F.3d 449 (1999) that a plaintiff prove "actual" harm as "an arbitrary and unwarranted limitation on the methods of proof."
To limit a plaintiff to direct proof, such as evidence of financial losses or a consumer survey, would unfairly bar the use of circumstantial evidence, Judge Leval wrote. " '[C]ontextual factors' have long been used to establish infringement," he observed, and "we see no reason they should not be used to prove dilution."
Judges Robert D. Sack and James B. Moran, sitting by designation from the Northern District of Illinois, joined in the opinion.
SIMILARITIES PREDOMINATE In finding dilution, Judge Leval noted that both the Pepperidge Farm and Nabisco crackers bear a distinctive similarity in that they are fish-shaped, bite-sized, orange and cheddar cheese-flavored.
Nabisco's placing of its own mark on one side of its cracker did not save its product from a dilution claim, Judge Leval found.
Nabisco's mark, he wrote, is "quite small and faint" and would not be "easily noticed, except on close inspection of a sort that is not likely to be performed by one who is intent on popping the crackers in his mouth."
Analyzing a different factor, the sophistication of the consumer, Judge Leval rejected Nabisco's argument that children would readily distinguish the differences between one of CatDog's favorite foods and Pepperidge Farm's Goldfish. Even if Nabisco is right that children would be "sophisticated" consumers in this regard, Judge Leval pointed out that it is their parents who do the shopping and it is "likely" that they will have "less awareness ... of the differences between the two competing crackers."
Pepperidge Farm was represented by Floyd Abrams, Jennifer Barrett and Elai Katz, of Cahill Gordon & Reindel, and Ethan Horowitz and Ira J. Levy of Darby & Darby.
Nasbisco was represented by Marie V. Driscoll, Robert A. Becker and Ronald E. Wiggins, of Fross, Zelnick, Lehrman & Zissu; James B. Swire, Sandra Edelman and Bruce R. Ewing, of Dorsey & Whitney; and Steven H. Hartman of Parsippany, N.J.