Universal Nutrition Corp. v. Carbolite Foods, Inc.

Citations: 325 F. Supp. 2d 526; 2004 WL 1638082Docket: CIV. 03-3265(GEB)

Court: District Court, D. New Jersey; July 21, 2004; Federal District Court

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Universal Nutrition Corporation initiated a legal action against Carbolite Foods, Inc. and Big Bear Natural Foods, Inc. for trademark infringement and false designation of origin under 15 U.S.C. 1051 et seq. The dispute centers around Carbolite's use of the CARBORITE mark for low-carbohydrate dietary supplements and Big Bear's involvement in selling and promoting these products. Carbolite counterclaimed against Universal, seeking to cancel Universal's CARB-RITE trademark registration.

The background reveals that both parties sell similar low-carbohydrate products, with Universal focusing on chocolate bars and Carbolite offering a broader range of dietary supplements. Key dates include Universal's shipment of CARB-RITE marked products to distributors in July and August 2001, Carbolite's intent-to-use application for CARBORITE on August 20, 2001, and Universal's subsequent registration of CARB-RITE on October 22, 2002. Carbolite's registration for CARBORITE followed on September 2, 2003. The court found that both parties' goods are substantially similar and that the marks CARBORITE and CARB-RITE are confusingly similar.

The court heard oral arguments on April 19, 2004, and subsequently granted Defendants' motion for summary judgment in part while denying Plaintiff's cross-motion. The matter was presided over by District Judge Richard B. Goldsmith in the United States District Court for the District of New Jersey.

On July 7, 2003, Universal initiated a legal action against Carbolite and Big Bear, with Carbolite subsequently filing counterclaims against Universal on December 15, 2003. A Scheduling Order was established by Magistrate Judge Bongiovanni on January 26, 2004, mandating initial disclosures by February 23, 2004; however, no discovery has reportedly been conducted. Universal attempted to strike portions of Carbolite's counterclaims on January 31, 2004, but this motion was denied on April 2, 2004, with a motion for reconsideration still pending as of the document's date. The current matter involves cross-motions for summary judgment from both parties.

To succeed in a motion for summary judgment, the moving party must demonstrate that no genuine issue exists regarding any material fact, thereby entitling them to judgment as a matter of law, according to Federal Rule of Civil Procedure 56(c). The court assesses whether factual issues exist that could only be resolved by a jury, favoring the non-moving party in its analysis. If the non-moving party fails to provide specific evidence to counter the motion, summary judgment may be granted against them. The burden of proof remains unchanged, and the determination of whether factual disputes warrant jury consideration is guided by the substantive evidentiary standards applicable to the case. The moving party is entitled to summary judgment on all properly supported claims unless the opposing party presents evidence showing a genuine issue of material fact.

No genuine issue of material fact is required for a motion for summary judgment. The non-moving party must present specific facts through affidavits, depositions, or other evidence to show a genuine issue for trial. Conclusory allegations in affidavits cannot substitute for detailed evidence. To create a genuine issue of material fact, the non-moving party must exceed a minimal evidentiary threshold. 

Defendants are seeking summary judgment based on the earlier filing date of their CARBORITE mark registration, claiming priority over Universal's CARB-RITE mark under 15 U.S.C. § 1057(c). They assert that there is no dispute regarding the likelihood of confusion between the marks, which should warrant summary judgment. Defendants also argue that the different classifications assigned by the PTO are irrelevant. 

Universal counters that Carbolite's registration is invalid and thus cannot confer priority rights. Alternatively, Universal argues that even if the registration is valid, it cannot apply to products in a different PTO classification (International Class 5 for CARB-RITE versus Class 30 for CARBORITE). To establish trademark infringement, Carbolite must demonstrate the validity and ownership of its mark and that Universal's use is likely to cause confusion. 

Carbolite claims priority based on its earlier application for the CARBORITE mark. However, Universal raises a genuine issue regarding the validity of this registration, asserting it may be canceled if Carbolite lacked a bona fide intent to use the mark or if the Statement of Use was false. Universal argues that further discovery is necessary to support its claims against the validity of Carbolite’s registration, and a denial of summary judgment is appropriate when such challenges arise.

A registrant can face cancellation of a trademark if false statements are made regarding its use in connection with the listed goods or services. Universal has raised questions about the validity of Carbolite's CARBORITE registration, suggesting possible fraud against the PTO, although Universal does not dispute Carbolite's ownership. Both parties acknowledge a likelihood of confusion between their marks, CARB-RITE and CARBORITE, which are used for low-carbohydrate products, including chocolate bars. The classification of goods by the PTO is deemed irrelevant in trademark infringement cases, as the focus is on likelihood of confusion rather than administrative categories.

Both marks are used for similar products despite being registered under different classes (CARB-RITE in Class 5 and CARBORITE in Class 30). The Lanham Act allows relief only for products listed in a registration, yet both parties are using their marks on chocolate bars, which means CARBORITE's registration, if valid, could prevent Universal from using CARB-RITE for those products. Since discovery is incomplete and Carbolite possesses evidence relevant to Universal's claims, summary judgment cannot be fully granted for the defendants at this time. The Court will grant the motion for summary judgment in part, acknowledging the need for further discovery regarding the validity of the CARBORITE registration.

Universal seeks summary judgment asserting priority over its CARB-RITE mark based on an earlier date of actual first use than that listed in Carbolite's registration application. Universal claims its first use was on July 28, 2001, rather than November 1, 2001, and contends it has common law rights as the senior user. To support this claim, Universal cites evidence of three shipments of its CARB-RITE products to distributors on July 28, August 6, and August 14, 2001. 

To establish trademark rights through use, Universal must demonstrate sufficient market penetration using a four-factor test: volume of sales, growth trends, number of purchasers relative to potential customers, and advertising efforts. The Court will only consider the two shipments made to Florida distributors, as sales to a non-U.S. distributor do not constitute "use in commerce." 

Universal shipped 48 boxes to American Nutritional and 72 boxes to Brazcom, but has not provided the dollar amount for these shipments. Defendants estimate the retail value of these two sales at approximately $4,800, which is argued to be below the threshold required to establish sufficient market penetration. The Third Circuit has ruled that the volume of sales must exceed de minimis levels to warrant protection.

Universal's reliance on two shipments to American Nutritional and Brazcom over four weeks is insufficient to demonstrate adequate market penetration for its CARB-RITE mark. The Court noted that Universal failed to provide evidence regarding the dollar value of the shipped products or sales data prior to August 20, 2001. Even assuming a minimal volume of sales, Universal did not meet the remaining criteria necessary for market penetration. The Court's analysis was limited to the shipments to Florida distributors, and it found no evidence of sales to consumers before the specified date, resulting in no triable issue regarding Universal's summary judgment motion. Furthermore, the Court concluded that Universal lacks common law trademark rights for the CARB-RITE mark prior to Carbolite’s constructive use, as it did not satisfy the four-factor market penetration test. Consequently, the Court granted in part the Defendants' motion for summary judgment and denied the Plaintiff's motion. An order reflecting this decision was signed on June 4, 2004, and filed on June 7, 2004. The Court also addressed a counterclaim concerning Carbolite's registration and fraud allegations, stipulating that Universal must provide clear evidence of fraud to avoid infringement claims.

Plaintiff incorrectly interprets "use in commerce" as it relates to the U.S. and foreign countries, as the statutory definition pertains to service marks rather than goods. The shipment of 24 boxes of CARB-RITE chocolate bars to Universal Europe BV does not significantly impact the conclusion that Universal had only a minimal volume of sales during the relevant period. Despite Universal's claims of lacking the opportunity to present marketing evidence, the Plaintiff has not provided sufficient supporting evidence across multiple briefs, failing to create a genuine issue of fact. The Court finds that the Plaintiff has had adequate opportunity to present its case and possesses the necessary information, indicating no need for further discovery. Additionally, the original Memorandum Opinion has been revised for publication but remains substantively unchanged.