Sweetener Manufacturer Looks to Burst Wrigley’s Bubble

Illinois District Court Continues Motion for Preliminary Injunction, Orders Hearing in Trademark Case

On September 28, 2012, the U.S. District Court for the Northern District of Illinois found that even though there was a “better than negligible chance of prevailing” on its claim that gum manufacturer Wm. Wrigley Jr. Company infringed a sweetener manufacturer’s trademark by using the name “Swerve” for a flavor of its popular sugar-free chewing gum, “5,” a hearing was necessary to determine Wrigley’s potential damages from a sales injunction. Wm. Wrigley Jr. Company v. Swerve IP, LLC, No. 11-9274 (N.D. Ill. 2012).

Despite the finding on likely success on the merits, and finding that Wrigley did not rebut the presumption of irreparable harm that both parties agreed applied, U.S. District Judge Harry D. Leinenweber found that in order to determine whether and to what extent the injunction would harm Wrigley, a further hearing was necessary to assess Wrigley’s damages if the Court granted the injunction and restrained Wrigley from using the name “Swerve.” In particular, Judge Leinenweber found that Wrigley’s claim that it would suffer over $2 million in financial loss from lost raw materials, sales, inventory, and rebranding costs, was too “general” and insufficient to analyze the more important issues of the “breakdown of financial harms, the projected life of the Swerve flavor, and what if any alternate products are in development.” Thus, the Court ordered an additional hearing to assess Wrigley’s likely harm, which the court would measure against the factors in favor of granting an injunction.

In analyzing Swerve IP’s likelihood of success, the Court determined that Swerve IP was likely to establish (1) that it had a protectable trademark, and (2) that there was a likelihood of confusion between its SWERVE all-natural sweetener and Wrigley’s “Swerve” flavor chewing gum. The court noted that SWERVE had been in use in commerce since 2001. The mark was registered on September 8, 2009 in International Class 030 and assigned to Swerve IP in 2011. In contrast, Wrigley filed its intent-to-use application for “Swerve” in 2010 and later launched its “Swerve” flavor of “5” brand gum in July 2011.

The Court next applied the Seventh Circuit’s multi-factor test for likelihood of confusion, i.e.: (1) the similarity between the marks in appearance and suggestion; (2) similarity of the products; (3) area and manner of concurrent use; (4) degree of care likely to be exercised by consumers; (5) strength of the plaintiff’s mark; (6) actual confusion; and (7) intent of the defendant to “palm off” his product as that of another.

Underlying the Court’s decision was its concern of “reverse confusion,” whereby a “junior user” — in this case Wrigley — uses its size and market power to overwhelm a senior, but smaller, mark user, such as Swerve IP. In this way, the senior user is harmed when the “public comes to assume that the senior user’s products are really the junior user’s or that the former has become somehow connected to the latter.” Sands, Taylor, & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 957 (7th Cir 1992).

Weighing the likelihood of confusion factors, the Court found that the first factor — the similarity between the marks — tipped in Wrigley’s favor, as the gum-maker’s use of “Swerve” in the marketplace consistently appeared alongside and was often dwarfed by Wrigley’s other marks. Nevertheless, on the second factor, the Court preliminarily found that the parties’ respective artificial sweetener and sugarless gum products were similar, noting that Wrigley’s own co-branding efforts with other sweeteners may lead consumers to believe that SWERVE sweetener was somehow affiliated with sugar-free “Swerve” gum. Despite this finding, the Court reserved its final determination on the strength of this factor until after the hearing. With respect to the “manner of concurrent use” factor, the Court noted similarities in the products’ in-store and online retail channels. However, the Court expressed greater concern for confusion in the online marketplace, given that consumers often rely upon keyword searches to locate a desired product, thus this factor slightly favored Swerve IP. Regarding consumers’ degree of care, the Court found in Wrigley’s favor, observing that Swerve IP’s customers exercise greater scrutiny because they tend to care more about natural ingredients contained in their sweetener. The Court noted that the fifth factor, the strength of Wrigley’s mark, tipped slightly in Swerve IP’s favor in light of Wrigley’s large market presence and the “Swerve” flavor’s notoriety within Wrigley’s “5” gum brand. Lastly, the Court found that the lack of evidence of actual confusion caused that factor to weigh in Wrigley’s favor. The Court declined to analyze the intent prong, finding that prong to be irrelevant in cases of reverse confusion. All in, the Court held that “Swerve IP has shown a better than negligible chance” of establishing a likelihood of confusion and was likely to prevail on the merits of its infringement claim.

The District Court went on to find that Swerve IP had no adequate remedy at law and that irreparable harm would result in the absence of an injunction. Although Wrigley argued that Swerve IP’s increasing settlement demand suggests that monetary relief would be a sufficient remedy, the Court refused to consider this argument in light of Fed. R. Evid. 408, which proscribes the admissibility of evidence of settlement discussions in certain circumstances. Nonetheless, the District Court declined to issue the requested injunction until the issue of Wrigley’s harm was properly analyzed at the upcoming hearing.

The decision underscores district courts’ reticence to depart from the presumption of irreparable injury in the context of infringement actions, despite the Supreme Court’s ruling in eBay v. MercExchange, L.L.C., 547 U.S. 388 (2006), which abrogated any such presumption in a case involving patent infringement. The eBay decision — and the injunction standard articulated therein — have since been extended beyond patents to cover copyright and trademark suits. See, e.g., Salinger v. Colting, 607 F.3d 68 (2010); Voice of the Arab World, Inc. v. MDTV Medical News Now, Inc., 645 F.3d 26 (1st Cir. 2011). Ultimately, the District Court declined to resolve the impact of eBay pending the hearing, deferring, in the interim, to the pre-eBay presumption, to be argued at the upcoming hearing.