Nabisco, Inc. v. PF Brands, Inc.

LEVAL, Circuit Judge:

Nabisco, Inc. and Nabisco Brands Company (collectively "Nabisco") appeal from the preliminary injunction entered by the United States District Court for the Southern District of New York (Shira A. Scheindlin, District Judge) upon the motion of Pepperidge Farm, Inc. and PF Brands, Inc. (collectively "Pepperidge Farm" or "Pepperidge"). The district court found that Nabisco's use of an orange, bite-sized, cheddar cheese-flavored, goldfish-shaped cracker (as part of a tie-in promotion of a Nickelodeon Television Network television production) would dilute the distinctive quality of Pepperidge Farm's mark consisting of an orange, bite-sized, cheddar cheese-flavored, goldfish-shaped cracker, in violation of the Federal Trademark Dilution Act ("FTDA"), section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c), and New York's antidilution statute, N.Y. Gen. Bus. Law § 360-l. The court entered an order requiring Nabisco to recall and cease selling its goldfish cracker. We affirm.

BACKGROUND

1. Facts

Pepperidge Farm has produced small crackers in the shape of a goldfish (the "Goldfish" cracker) continuously since 1962. Although the Goldfish line of products includes crackers in various flavors and mixes, the primary product is the orange, cheddar cheese-flavored, fish-shaped cracker, sold in a bag or box under the trade name "Goldfish" and exhibiting a picture of the cracker on the exterior. The company has obtained numerous trademark registrations for the Goldfish design and name. In 1994, it launched an aggressive marketing campaign directed at children, who make up about half of Goldfish consumers, and between 1995 and 1998, it spent more than $ 120 million marketing the Goldfish line nationwide. The cracker has also been the subject of substantial media coverage, including a feature on "The Today Show" and an episode on "Friends." From 1995 to 1998, net sales of Goldfish crackers more than doubled, to $ 200 million per year. Measured by sales volume, Pepperidge Farm's Goldfish is the second-largest selling cheese snack cracker in America today. Measured in sales dollars, Goldfish ranks number one.

Occasionally, companies other than Pepperidge Farm have produced cheese crackers shaped like sea creatures, including "Guppies," "Dolphins & Friends," and "Whales." Only one of these products has included a cracker shaped like a goldfish--Nabisco's "Snorkels." Snorkels obtained only a small market share, and it is no longer on the market.

In spring 1998, Nickelodeon Television Network approached Nabisco to explore a possible joint promotion for Nickelodeon's new cartoon program, "CatDog." In August 1998, Nabisco and Nickelodeon entered a Joint Promotion Agreement ("JPA"), giving Nabisco the right to produce cheese crackers in shapes based on the CatDog cartoon. The agreement required Nabisco to print on its packages that "CatDog and related titles, logos and characters are trademarks of" Nickelodeon's parent, Viacom International, Inc. Nabisco's CatDog product was intended to compete with other animal-shaped cheese crackers marketed to children.

The star of the CatDog cartoon program is the CatDog--a two-headed creature that is half cat and half dog. Each half of the CatDog has a distinct personality. The fish is the favorite food and the symbol for the cat half; the bone is the preferred meal and emblem for the dog half. Other characters that are featured on the cartoon include a mouse, a rabbit, a squirrel, and several dogs. In its first three months, the CatDog show garnered a 3.9 Nielsen rating, making it close to the most widely watched program for children.

Pursuant to its agreement with Nickelodeon, Nabisco developed a CatDog snack that consists of small orange crackers in three shapes: half the crackers in a package are in the shape of the two-headed CatDog character, one-quarter in the shape of a bone, and one-quarter in the shape of a fish. The fish-shaped cracker closely resembles Pepperidge Farm's Goldfish cracker in color, shape, and size, and taste, although the CatDog fish is somewhat larger and flatter, and has markings on one side. The CatDog product was to be sold in boxes featuring the CatDog and showing fish and bones in the background. The launch of the CatDog product was set for February 1, 1999.

2. Proceedings Below

In mid-December 1998, executives at Pepperidge Farm for the first time saw a sample of the CatDog product. On December 21, Pepperidge Farm wrote to Nabisco protesting the goldfish-shaped cracker and requesting that Nabisco cease and desist use of that cracker in its product and marketing. Nabisco responded by filing a complaint against Pepperidge Farm seeking a declaratory judgment under 28 U.S.C. § 2201 that the CatDog product did not violate any of Pepperidge Farm's rights in the Goldfish. Pepperidge Farm counterclaimed that Nabisco's goldfish constituted trademark infringement under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and dilution under the FTDA, § 43(c) of the Lanham Act, 15 U.S.C. § 1125(c), as well as dilution and unfair competition under New York law. Pepperidge Farm moved for a preliminary injunction barring Nabisco from marketing its product.

The district court found for Pepperidge and granted the preliminary injunction on the federal and state dilution claims, but not on the federal trademark infringement or state unfair competition claims. In a thorough opinion, the district judge concluded that the Pepperidge Farm Goldfish mark is nonfunctional, distinctive and famous and is protectable under the antidilution and infringement statutes. In deciding whether Nabisco's use of a fish in its CatDog product would dilute the Goldfish mark, the court applied the six-factor test proposed in a concurring opinion in Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., relating to the New York antidilution statute. The court found that each of the six Mead Data factors weighed in favor of a finding of dilution, and concluded that Pepperidge Farm had proven a likelihood of success on the merits of its dilution claims under both federal and state law.

In essence, Pepperidge Farm has taken a unique and fanciful idea--creating a cheese cracker in the shape of a goldfish--and turned this idea into its signature. Nabisco's inclusion of this signature element as part of the CatDog product strikes at the heart of what dilution law is intended to prevent: the "gradual diminution or whittling away of the value of the famous mark by blurring uses by others." Over time, the presence of Nabisco's goldfish-shaped cracker within the CatDog mix is likely to weaken the focus of consumers on the true source of the Goldfish.

The court also concluded that likelihood of dilution "automatically" establishes irreparable harm, because "dilution is itself an injury which [cannot] be recompensed by money damages.”

On the other hand the court found that Pepperidge Farm had failed to show a likelihood of success in establishing a claim of trademark infringement. This conclusion was primarily supported by Pepperidge Farm's failure to demonstrate that any actual confusion had occurred among consumers, and the fact that Nabisco's goldfish was part of a three-shape mixture and came in a package that featured most prominently the CatDog, rather than the fish.

Based on its finding of likely success in proving dilution, the court ordered Nabisco to recall and cease distributing its goldfish crackers. Nabisco appeals.

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[I]n considering Pepperidge's claim under the new federal antidilution statute, rather than exploring all factors that might bear on the issue of dilution, the district court limited itself to six items that were identified as the pertinent factors in a concurring opinion in this court considering the question of dilution under the New York statute.

Those factors were: (1) similarity of the marks; (2) similarity of the products covered by the marks; (3) sophistication of consumers; (4) predatory intent; (5) renown of the senior mark; and (6) renown of the junior mark. We pass for the moment the usefulness of these six factors in determining a question of New York law, as to which the federal courts will defer to the analysis of New York courts.

We think it would be a serious mistake at the outset of our consideration of the new federal antidilution statute to limit ourselves to these six factors or to any other putatively definitive list. At this stage, even the best-designed test would likely omit some important factors (and perhaps include others that will at times be irrelevant). Rather, in considering a new federal statutory right, it seems to us that courts would do better to feel their way from case to case, setting forth in each those factors that seem to bear on the resolution of that case, and, only eventually to arrive at a consensus of relevant factors on the basis of this accumulated experience.

When Judge Friendly made his famous list of factors pertinent to an infringement analysis in Polaroid, his opinion drew on generations of analysis of the laws of trademark infringement. And even then his list was non-exclusive; the opinion took pains to insist that in other cases other factors would no doubt emerge as relevant. In contrast the Mead Data concurrence proposes a short closed-end list of six factors, which the district court applied to a new statute that creates a concept previously unknown in the federal law.

The promulgation of such a list has a tendency to quash open-minded, constructive thinking about a new statutory right. We believe it is by far premature for federal courts to declare and close the list of factors that will be deemed pertinent in cases under the new federal act. We therefore decline to adopt the Mead Data factors as a fixed test for dilution under the FTDA.

Furthermore, in our view, the Mead Data list, at least as applied to the federal statute, seems to have several deficiencies. First, it confusingly conflates fame and distinctiveness. The opinion tests the "renown" of the senior mark as one of the six pertinent factors. Renown means fame. In its discussion of the "renown" factor in Mead Data, the opinion suggests that this factor could be satisfied by either fame or distinctiveness. As discussed above, fame and distinctiveness are altogether different considerations. A mark can be famous without being at all distinctive, as in the cases of American Airlines, American Tobacco Company, British Airways, Federated Department Stores, Allied Stores or the First National Bank of whatever. At the same time a mark can be highly distinctive, meaning arbitrary and fanciful, and yet be completely unknown. In our view, the lumping together of those factors under the name "renown" confuses more than it clarifies.

The Mead Data test furthermore fails to include a number of the factors reviewed above that we believe to be pertinent. Those include actual confusion and likelihood of confusion, shared consumers and geographic isolation, the adjectival quality of the junior use, and the interrelated factors of duration of the junior use, harm to the junior user, and delay by the senior in bringing the action. We make no suggestion that the factors we have focused on exhaust the test of what is pertinent. New fact patterns will inevitably suggest additional pertinent factors.

In short, we think no court should, at least at this early stage, make or confine itself to a closed list of the factors pertinent to the analysis of rights under the new antidilution statute. Upon the final trial on the merits, the district court should not limit itself to consideration of the factors listed in the Mead Data concurrence.

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CONCLUSION

Pepperidge Farm has demonstrated likelihood of success in proving that Nabisco's use of its goldfish-shaped cheddar cheese cracker will dilute Pepperidge Farm's mark in its similar, famous, goldfish-shaped cheddar cheese cracker. We affirm the court's order preliminarily enjoining the distribution of Nabisco's goldfish cracker.