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ET Browne Drug Co v. Cococare Prod Inc
Citation: Not availableDocket: 06-4543
Court: Court of Appeals for the Third Circuit; August 5, 2008; Federal Appellate Court
Original Court Document: View Document
E.T. Browne Drug Co. ("Browne") disputes Cococare Products, Inc. ("Cococare") over trademark rights to the term "Cocoa Butter Formula" for personal care products containing cocoa butter. Browne asserts that it possesses a protected trademark under the Lanham Act, while Cococare argues that the term is generic and not entitled to protection. The District Court ruled in favor of Cococare, concluding that "Cocoa Butter Formula" is generic. The Third Circuit affirmed this decision, agreeing that Browne did not demonstrate the term's protectability but indicating that a genuine issue exists regarding its generic status. The Court noted that if the term were deemed descriptive, Browne would need to show it has acquired secondary meaning, which it failed to do. The court also remanded the case for the District Court to issue an appropriate order under 15 U.S.C. § 1119. Browne’s "Cocoa Butter Formula" is on the PTO’s supplemental register, lacking the presumption of validity afforded to terms on the principal register, where its "Palmer's" brand is listed. Cococare, although selling fewer products, markets its offerings under a similar name.
The dispute centers around Browne's claims against Cococare regarding the use of the term "Cocoa Butter Formula." Browne was aware of its claims since 1993 but delayed action due to Cococare's minimal sales and limited sightings of its products until it formally objected in 2002. After Cococare did not comply with a cease-and-desist letter, Browne filed a lawsuit in the United States District Court for the District of New Jersey, alleging violations of the Lanham Act and New Jersey law.
Cococare counterclaimed for the cancellation of Browne’s supplemental trademark registration for "Cocoa Butter Formula" and sought summary judgment, arguing that the term is generic, and Browne’s claims are barred by laches and unclean hands defenses, as well as fair use. Browne cross-moved for summary judgment on these issues. The District Court ruled that "Cocoa Butter Formula" is a generic term, granting summary judgment to Cococare and dismissing Browne’s claims. The court rejected Cococare’s counterclaims, finding no substantive evidence of fraudulent statements by Browne to the PTO and noted that Cococare had not suffered actual damages.
Browne appealed, challenging the court's conclusion that the term is generic. Cococare also appealed, seeking cancellation of the supplemental registration and asserting that "Cocoa Butter Formula" has not acquired secondary meaning, and that Browne's actions were barred by laches and unclean hands, while also claiming fair use of the term. Jurisdiction for the case was established under 28 U.S.C. 1338(a) and 1338(b), with appellate jurisdiction under 28 U.S.C. 1291. The review standard on appeal mirrors that of the District Court, assessing for genuine issues of material fact regarding trademark validity and protectability under the Lanham Act, which requires proof of the mark's validity, ownership, and likelihood of confusion.
Terms asserted as trademarks are categorized into four types: (1) arbitrary or fanciful terms, which have no logical relationship to the goods; (2) suggestive terms, which imply characteristics of the goods; (3) descriptive terms, which explicitly describe a characteristic or ingredient; and (4) generic terms, which serve as the common name for a product class. Under the Lanham Act, generic terms are not protected, as a first user cannot restrict competitors from using a term that describes a product. Descriptive terms can be protected if they have acquired secondary meaning associated with the claimant. In contrast, suggestive and arbitrary or fanciful terms do not require proof of secondary meaning for protection.
In the case at hand, Browne claims that "Cocoa Butter Formula," which is not registered on the PTO’s principal register, deserves protection as a descriptive term that has acquired secondary meaning. Cococare argues it is a generic term, creating a complex trademark issue. The determination of whether "Cocoa Butter Formula" is generic or descriptive, and if it has acquired secondary meaning, are factual questions. The court finds that Browne has sufficient evidence to argue "Cocoa Butter Formula" is descriptive but lacks evidence to support its claim of acquired secondary meaning. Consequently, the court concludes that "Cocoa Butter Formula" does not qualify for protection under the Lanham Act.
The appeal addresses the appropriate test for evaluating the generic nature of "Cocoa Butter Formula." The primary significance test is used to determine if the term primarily signifies the product or the producer in the eyes of consumers.
Determining whether a term is generic or descriptive hinges on consumer perception, specifically whether the term identifies a general product (generic) or a specific source (non-generic). The District Court's analysis of "Cocoa Butter Formula" deviated from the primary significance test, instead adopting an alternative approach from Canfield, which is inapplicable in this case. The court initially acknowledged that the product genus in question was not disputed, with both parties agreeing that it relates to "Cocoa Butter Skin Care Products." However, it later incorrectly identified "cocoa butter formula" as the relevant product class. The Canfield case involved distinguishing between chocolate soda and chocolate fudge soda, a situation not present here since both parties concur on the product category. The essence of Canfield’s principles is that while the primary significance test presumes courts understand the product's genus, this is not always clear, particularly for new products that may possess unique characteristics. Thus, the court's departure from the established consensus on product classification was erroneous.
The addition of a new flavor or ingredient to a product, such as honey in "Honey Brown Ale," often results in the creation of a new product type, necessitating descriptive terminology for consumer identification. This situation prompts a consideration of the appropriate product genus for analyzing genericness, either as an established product class or a modified new class. Canfield provided a framework for this analysis by proposing an equation that combines the new product name, established product class, and new characteristic. In the case at hand, "Skin Care Products" or "Lotion" represents the established class, and "Cocoa Butter" is the new characteristic. Browne could have titled its products "Cocoa Butter Skin Care Products" or "Cocoa Butter Skin Care Lotion," aligning with Canfield’s equation. However, Browne chose the term "Cocoa Butter Formula," which does not trigger the complexities of the primary significance test because it does not raise questions about the appropriate genus. The term "Formula" does not indicate an established product class related to skin care, as evidenced by the lack of consumer association with "Formula" in this context.
The evaluation of the term "Cocoa Butter Formula" will focus solely on the primary significance test, which determines whether the term primarily signifies the product or the producer to consumers. This requires an assessment of how the term is perceived by the relevant public, considering its overall meaning rather than disassembling it. The inquiry will establish if there is a genuine factual dispute regarding Browne's claim that consumers do not view "Cocoa Butter Formula" as generic but rather as descriptive. Plaintiffs often utilize survey evidence to demonstrate descriptiveness, such as Teflon surveys, which educate participants on the distinction between generic and trademark terms before testing their responses.
After participants understand the distinction in terminology, they categorize terms related to a product. A "Thermos survey" assesses whether respondents refer to a product by a brand name (like "Thermos") instead of its general category name (like "Vacuum Bottle"). Such usage suggests that the brand name has become generic. Browne's survey followed this model, asking 154 participants to identify a skin care product containing cocoa butter. None mentioned "Cocoa Butter Formula" or "Formula" in their responses. The District Court admitted this survey but deemed it to have "little or no probative value" within the summary judgment framework, without inappropriate evidence weighing. Cococare appealed, arguing for a review of clear error similar to a prior case, Johnson-Merck, which involved different procedural circumstances (preliminary injunction vs. summary judgment). The current case emphasizes the significance of these procedural distinctions, particularly in trademark actions where summary judgments are rare. The District Court's role was to assess whether Browne's claims warranted trial, and the appellate review will be plenary rather than deferential regarding the legal question of summary judgment.
The District Court identified two main errors in Browne's survey: the omission of the term "Palmer’s," which the Court believed undermined Browne’s case and rendered the questions flawed and misleading, and the presence of leading questions that could elicit specific responses. However, the survey aimed to determine if consumers use "Cocoa Butter Formula" to describe cocoa butter skin care products, a central issue in the genericness dispute. While Cococare's expert evidence suggested that the term "Cocoa Butter" may have influenced responses, this does not negate the survey's probative value, though it raises questions about the weight a jury might assign to it.
The Court found that including "Palmer’s" would confuse the survey's focus, which is on "Cocoa Butter Formula," not the trademarked phrase. Although the survey had notable flaws, such as only 30% of respondents using a noun to identify the product genus, these issues do not eliminate its probative value. The survey indicates that "Cocoa Butter Formula" may not be viewed as a generic descriptor by the respondents. Cococare could challenge this inference in court, but it still creates a genuine issue of material fact.
Browne's evidence that competitors use terms other than "Cocoa Butter Formula" supports the argument that the term is not generic, aligning with historical legal principles regarding the consideration of alternative terms. The Court concluded that the District Court erred by granting summary judgment on the genericness of "Cocoa Butter Formula" without conducting a secondary meaning analysis. Additionally, the Court found Browne's argument regarding dictionary definitions irrelevant, noting that not all generic terms are listed in dictionaries.
The District Court's reasoning that the registration of "Cocoa Butter Formula" on the PTO’s supplemental register undermines Browne’s claim of descriptiveness lacks support. The court clarified that the validity of a term not on the principal register hinges on its secondary meaning. Browne cannot obtain summary judgment regarding the genericness of the term due to issues in the genericness survey, indicating a genuine material fact dispute. If "Cocoa Butter Formula" is deemed descriptive, Browne must prove it has acquired secondary meaning associated with its brand. Cococare sought summary judgment, contending Browne failed to present sufficient evidence of secondary meaning. The District Court outlined the secondary meaning analysis and factors but ultimately concluded that other factors indicated the term is generic. The appellate court chose to resolve the secondary meaning question to promote judicial efficiency and affirmed the District Court’s summary judgment. Secondary meaning occurs when a term, not inherently distinctive, is understood by the public as indicative of a product's origin, typically established through extensive advertising. Eleven factors relevant to determining secondary meaning include sales and advertising extent, length and exclusivity of use, customer surveys, and instances of actual confusion. Browne’s evidence of secondary meaning includes 20 years of continuous use and promotion of the term, significant advertising expenditures, Cococare’s alleged copying, and increased sales of products featuring the term. This evidence may initially appear supportive of Browne’s claim for secondary meaning.
Serious flaws in Browne's evidence prevent the establishment of a genuine issue regarding the secondary meaning of the term "Cocoa Butter Formula." Although Browne frequently used the term over time, there is no indication that it successfully created secondary meaning among consumers. The evidence does not support the conclusion that the term gained such meaning; jurors would need to speculate on the impact of advertising and sales growth without concrete support. Previous case law suggests that secondary meaning could be inferred from consistent advertising and revenue growth, but Browne's case diverges as it did not present evidence of using "Cocoa Butter Formula" independently in marketing; it was always coupled with "Palmer’s," forming the unified phrase "Palmer’s Cocoa Butter Formula." This presentation limits any inference of secondary meaning related solely to "Cocoa Butter Formula." Consequently, there is insufficient evidence for a jury to determine the term's independent strength. Additionally, Browne's claim regarding Cococare's intent to copy the term does not create a genuine issue of material fact concerning secondary meaning, as this evidence mainly addresses trade dress rather than the term's distinctiveness. The dispute does not challenge Browne's valid trademark registration for "Palmer’s Cocoa Butter Formula," but Cococare seeks to alter this registration regarding the term "Cocoa Butter Formula," which it contends is generic.
Browne's assertion of trademark protection for "Cocoa Butter Formula" lacks sufficient evidence to demonstrate that the term has acquired secondary meaning, essential for establishing a protectable trademark interest. The only evidence Browne presents is testimony from Cococare’s founder, who indicated awareness of Browne's use of the term but chose "Formula" as a standard industry descriptor, rather than as an attempt to copy Browne. This does not support a finding of intent to copy. Browne could have strengthened its case by conducting a secondary meaning survey similar to its previous genericness survey, but its failure to do so leaves a gap in evidence regarding consumer perception of the term. Consequently, Cococare is entitled to summary judgment on the grounds that "Cocoa Butter Formula" is generic and not protectable as a trademark. Additionally, the court considered Cococare's counterclaim for the cancellation of Browne’s registrations related to the term under 15 U.S.C. 1119, which allows for the rectification of trademark registrations when a controversy exists. However, no further evidence from Cococare is needed at this stage to adjudicate the secondary meaning issue, as Browne has not identified sufficient evidence to warrant a jury's consideration.
A controversy exists regarding the validity of the term “Cocoa Butter Formula” and its status on the supplemental register, raising the need for a disclaimer on the principal register for the mark “Palmer’s Cocoa Butter Formula.” Cococare has counterclaimed for a modification of this mark, satisfying the requirement established in Ditri for a valid controversy concerning registered marks. The District Court previously declined to order a disclaimer, believing it wouldn't benefit Cococare. However, the absence of a disclaimer could mislead future businesses regarding their use of the term “Cocoa Butter Formula.” Therefore, the District Court is directed to issue an appropriate disclaimer on the principal register.
The issue of the supplemental registration is more complex; a descriptive term without secondary meaning can be on the supplemental register but not the principal register. The District Court should refrain from any orders regarding the supplemental registration unless Cococare successfully proves the term “Cocoa Butter Formula” is generic in its counterclaim. If proven, the District Court could then order modifications, including the potential removal of the term from the supplemental register.
Cococare contends that Browne's trademark claim is invalid due to delays in asserting rights and alleged misrepresentations to the PTO, suggesting Browne has "unclean hands." Cococare also claims it is entitled to summary judgment based on fair use of the term. However, these arguments are unnecessary to address given the conclusion that Browne does not possess protectable trademark rights in “Cocoa Butter Formula.” The judgment of the District Court is affirmed with the exception of remanding for consideration of Cococare’s request for relief under 15 U.S.C. 1119.