white printing on those wrappers. (See Def. Ex. 15, Items B, C, E, G, I, L.) The white-on-gold foil wrapper for individual pieces of Werther's Original candy is not distinctive as a matter of law.
Storck has also failed to persuade the court that the wrapper has acquired secondary meaning. Although Storck heavily advertises its Werther's Original product, any promotional emphasis on the foil wrappers addresses its gold color, and not the white-on-gold combination. The "Grandfather" television commercial most directly focuses the viewers' attention on the individual wrappers. (Tennant Decl., P7, Ex. A.) Even this advertisement, however, emphasizes the gold color, and not the white-on-gold combination.
Thus, while the amount of Storck's advertising weighs in favor of secondary meaning, the content of that advertising does not.
Also relevant to secondary meaning are the volume of sales of the product and the length and manner of use of the trade dress. Storck does not sell its Werther's Original product in bulk. (Supp. Harshman Decl., P4.) Instead, the individual candies are sold to retailers and then to consumers in a sealed bag. Each sealed bag contains numerous pieces of individual candy pieces. Moreover, the clear window on the back of the 7-ounce bag of Werther's Original is the only portion of the package through which individual gold-wrapped pieces of the candy are visible. Thus, although sales of Werther's Original were in excess of $ 100 million from 1989 to 1991 and although Storck has used the white-on-gold wrappers since 1980 (Second Harshman Decl., PP5-6), virtually all sales have been completed in a setting in which the white-on-gold aspect of the foil wrappers does not play a significant role.
See Tootsie Roll Indus., Inc. v. Sathers, Inc., 666 F. Supp. 655, 660 (D. Del. 1987) (court notes difficulty in identifying source of product through clear plastic window of package). Market leadership or use of a particular trade dress over a substantial time period, even when coupled with extensive advertising, does not insure that every aspect of the product, no matter how material, has acquired a secondary meaning.
Storck submitted consumer letters to demonstrate consumer association between Storck and the white-on-gold wrapper of Werther's Original. (Second Harshman Decl.,Ex. G.) The court sustained Farley's objection to the admission of these letters. However, even if the court were to consider the letters, they do not reveal secondary meaning. Consumer comments regarding the "gold wrapper" are not relevant to the wrapper's secondary meaning because, as ruled above, the court will not grant trade dress protection to the gold color of the wrapper. Only one of the letters mentions the white printing on the gold wrapper. This sole comment, even if admissible, is clearly insufficient to establish that the white-on-gold trade dress of the Werther's Original wrapper has acquired secondary meaning.
Storck also conducted a consumer survey to measure the secondary meaning of the wrapper trade dress. (First Lavidge Decl., Ex. D.) Survey respondents viewed three plates, each of which held individually wrapped pieces of one of three brands of butter candies, including Werther's Original.
For each brand, the respondent was asked, "Do you think pieces of butterscotch or buttery-flavored hard candy with wrappings that look like these are put out by one company or by more than one company?" Each respondent then explained his or her answer. (Id.)
Forty-six percent of the respondents viewing Werther's Original pieces answered that candies with such wrappers are put out by one company.
(Id.) This result is not a persuasive finding of secondary meaning. See Spraying Systems Co., 762 F. Supp. at 779 n.6 (citing 2 McCarthy, Trademarks and Unfair Competition § 32:54, at 785-86) (to prove secondary meaning, a substantial portion of buyers must associate the product with one source; generally over fifty percent is clearly sufficient and 38 percent would be marginal in a properly designed survey). In order to establish secondary meaning, a party must show that consumers associate its trade dress with the producer of the product rather than the product itself. A.J Canfield Co. v. Vess Beverages, Inc., 796 F.2d 903, 907 (7th Cir. 1986). The verbatim explanations from Storck's survey indicate that several respondents found the primary significance of the trade dress was to identify the product (butterscotch candy) and not the producer. This causes the court to believe that the percentage of respondents who actually associated the Werther's Original wrapper with one company was lower than the 46 percent proffered by Storck.
More basically, the survey itself is not probative of secondary meaning. Secondary meaning is a type of distinctiveness which is acquired over time as consumers associate a trade identity designation with a particular source. There is no evidence here that respondents had ever seen the Werther's Original product prior to this survey. In fact, the explanations provided by respondents who answered "one company" indicate that the survey question actually addressed the inherent distinctiveness of the products. Thus, the court does not consider the secondary meaning survey to be probative of secondary meaning since no aspect of the survey insured that what was being tested was acquired distinctiveness (i.e., secondary meaning) rather than inherent distinctiveness.
After consideration of various factors that tend to show secondary meaning, the court does not find that the white-on-gold wrapper of Werther's Original candy pieces has acquired secondary meaning. As discussed above, the court also finds that the wrapper is not distinctive. Consequently, Storck's likelihood of success on the merits of its trade dress claim for its gold foil wrapper is less than negligible. The wrapper is afforded no trade dress protection under the Lanham Act.
II. REMEDY AT LAW AND IRREPARABLE HARM
Having held that Storck has a better than negligible chance of success on the merits of its package trade dress infringement claim, the court must consider other factors relevant to the issuance of a preliminary injunction. Damages occasioned by trademark or trade dress infringement "are by their very nature irreparable and not susceptible of adequate measurement for remedy at law." Processed Plastic Co. v. Warner Communications, 675 F.2d 852, 858 (7th Cir. 1982). "The most corrosive and irreparable harm attributable to trademark infringement is the inability of the victim to control the nature and quality of the defendant's goods." Ideal Indus., Inc. v. Gardner Bender, 612 F.2d 1018, 1026 (7th Cir. 1979), cert. denied, 447 U.S. 924, 100 S. Ct. 3016, 65 L. Ed. 2d 1116 (1980). Irreparable harm may result from the loss of goodwill in a given product. Tootsie Roll Industries, Inc., 666 F. Supp. at 660.
In general, the extent of harm from infringement varies with the product and the sophistication of the market for that product. Maxim's Ltd. v. Badonsky, 772 F.2d 388, 392 (7th Cir. 1985). As in this case,
where the product involved was a low value item, the risk of confusion is greater "because purchasers are unlikely to complain when dissatisfied, which would bring to light confusion; but rather they are likely simply to avoid all products produced by the company which they believed produced the product which caused the trouble."
Id. at 393 (quoting Union Carbide Corp. v. Ever-Ready Inc., 531 F.2d 366, 383 (7th Cir. 1976)). The relative unsophistication of the candy purchasing decision augments the degree of harm Storck will suffer from the trade dress of Farley's Butter Toffee. In addition, because both Storck's and Farley's products are butter candies, are sold in close physical proximity to one another in retail stores, and are impulse-purchase items, it is likely that an appreciable number of customers will be misled, causing irreparable harm. Furthermore, any loss of goodwill by Storck due to its inability to control the quality of Farley's candy is difficult if not impossible to quantify in monetary terms. See id. Thus, Storck does not have an adequate remedy at law.
III. SLIDING SCALE
A. BALANCE OF THE HARMS TO THE PARTIES AND THE PUBLIC
Storck has expended millions of dollars promoting its packages and trade designations in order to become the leader in its product category. In the past three years alone, Storck has expended $ 17,000,000 promoting and advertising its Werther's Original candy. Storck's sales of the candy in the past three years have been in excess of $ 100,000,000. Werther's Original is one of only four candy products produced by Storck. Werther's Original, however, accounts for 85 percent of Storck's sales. (Testimony of Harshman, Hearing of June 30, 1992.) In contrast, Farley's Butter Toffee is one of "several hundred" candy products produced by Farley. Farley estimates that sales of its butter toffee will grow to 3 percent of Farley's sales in 1992. (Statements of Gary Ricco, Farley's Vice-President of Finance, Hearing of June 30, 1992.)
Farley has indicated that it would suffer substantial hardship if the preliminary injunction were to issue. In contrast to the time of the first preliminary injunction, Farley's Butter Toffee is now being sold throughout the United States. Preliminarily enjoining Farley from using its current butter toffee package would preclude Farley "from filling any current and future orders," resulting both "in lost profits" and lost "good will of customers who have orders pending." (Farley Mem. in Opp., p. 23.) Additionally, Farley will incur costs to destroy the infringing packaging and to create new noninfringing packaging for its butter toffee. These costs, however, are not irreparable.
On balance, the irreparable harms to Storck resulting from denying the preliminary injunction are far greater than the irreparable harms to Farley resulting from granting the preliminary injunction. The goodwill that Storck has wrapped up in its Werther's Original product is much more established than the goodwill Farley has in its butter toffee product. Werther's Original has been on the market for much longer than Farley's Butter Toffee and has been extensively promoted with particular emphasis on its trade dress. Furthermore, given the significance of Werther's Original's sales to Storck's total revenue, the impact of any loss of public perception and confidence in the Werther's Original product from consumer confusion with Farley's package greatly outweighs whatever similar loss would be suffered by Farley as a result of being required to change its butter toffee package. Finally, the public interest in avoiding marketplace confusion, in protecting product goodwill, and in fostering open and fair competition favor granting the preliminary injunction.
B. ACTUAL LIKELIHOOD OF SUCCESS ON THE MERITS
For the reasons set forth in Part I above, the court believes that the actual likelihood of success of Storck's trade dress infringement claim addressing its Werther's Original package is substantial.
The more likely the plaintiff is to win, the less heavily need the balance of harms weigh in plaintiff's favor in order to get the injunction. Thornton, 890 F.2d at 1384. The court believes that the balance of harms clearly weighs in favor of granting Storck's motion for a preliminary injunction. Given Storck's substantial likelihood of success on the merits, and upon weighing the harms to the parties and the public, a preliminary injunction must issue.
IV. PROPER SECURITY
Federal Rule of Civil Procedure 65(c) advises:
No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.
The security requirement of Rule 65(c) is to protect the restrained party from damages incurred by that party as a result of the wrongful issuance of an injunction. Although the court after considering the evidence believes the determination made today is correct, the court must assess the harm which would result to defendant Farley if the court is wrong and determine the proper security to be posted by plaintiff Storck.
At the hearing in response to the court's questions, Farley proffered that its butter toffee candy has generated $ 500,000 in sales in the approximately four months (March, April, May and June, 1992) the product has been on the market. Farley projects that the total of 1992 sales of its butter toffee candy may exceed $ 5 million, which Farley estimates would be equal to 3 percent of its sales from the several hundred candy products sold by Farley. Today's ruling, however, does not prohibit the sale of Farley's Butter Toffee candy, nor does it inhibit the use of Farley's gold foil wrapper which surrounds each individual butter toffee candy sold by Farley. Therefore, the $ 2 million in individually wrapped candies, which has a shelf life of six to nine months, can be repackaged and sold by Farley.
Moreover, it is the present format of the outside packaging of Farley's Butter Toffee candy against which the injunction issues today. Should Farley feel confident that its position will prevail either at a full trial or on appeal, Farley should retain for future use the outside packaging of its $ 2 million finished product inventory of butter toffee and the packaging film banned today.
If, of course, Farley does not prevail, the issue regarding its damages for which the bond is posted is moot.
One other problem exists regarding Farley's packaging. As noted by the court at the conclusion of the hearing, the use of the American flag "for advertising purposes" on the outside package of Farley's Butter Toffee candy, which "is designed for temporary use and discard," appears to violate 36 U.S.C. § 176(i).
See Figure 4.
Having now been apprised of the statutory law regarding proper respect for the American flag, Farley, on that basis alone, may desire to change its outside packaging for its candy products. Thus, the harm caused to Farley by this injunction would be mooted by its decision, consistent with Farley's obvious American pride, to comport its conduct to the statutorily mandated respect for the American flag.
Moreover, as soon as Farley can market its individually wrapped butter toffee candy in an outside package that does not violate the law, it can again compete with Storck's Werther's Original candy in the marketplace.
Given these factors, the court believes that an appropriate bond to be posted by prevailing plaintiff Storck should be $ 1.5 million. Bond is to be posted no later than 10 days from the date of the docketing of this opinion.
After careful consideration of the facts in light of the legal criteria applicable to the issuance of a preliminary injunction, the court concludes that Storck is entitled to a preliminary injunction with respect to Farley's use of its current trade dress for its butter toffee candy product. Storck is not entitled to a preliminary injunction with respect to Farley's use of a gold foil wrapper for individual pieces of its butter toffee candy product.
The court is mindful that preliminary injunctive relief should be limited to what is necessary in order to redress defendant's specific wrongful conduct. See Mantek Division of NCH Corp. v. Share Corp., 780 F.2d 702, 711 (7th Cir. 1986). Although individual elements of the Werther's Original package trade dress are descriptive or suggestive and not distinctive, the layout of these elements on the Werther's Original package creates an overall visual impression which is distinctive and arbitrary. Thus, the relief ordered herein is limited to addressing the overall appearance of the Farley's Butter Toffee package trade dress in order to reduce the likelihood of confusion which currently exists between the package trade dresses of Farley's Butter Toffee and Storck's Werther's Original candy.
Plaintiff Storck's second motion for a preliminary injunction is GRANTED in part and DENIED in part. Specifically,
1. Defendant Farley is preliminary enjoined from:
(a) using any trade dress in the bottom half of the front panel of any Farley candy package which is in any way similar to the image of a mound of unwrapped candy pieces used by Storck as trade dress for its Werther's Original butter candy.
(b) using any trade dress in the left half of the front panel of any Farley candy package which is in any way similar to the pastoral image or oval-shaped design used by Storck as trade dress for its Werther's Original butter candy.