Sour Patch Kids v. Stoney Patch: Dilution, Tarnishment, and Marijuana Trademark Litigation

By: Heidi Urness, Attorney at Heidi Urness Law

Last month (July 2019), the manufacturer of the popular candy Sour Patch Kids (Mondelëz Canada Inc., or “MCI”) filed a trademark lawsuit against the makers of “Stoney Patch” Sour & Sweet Jelly Candies – which are THC-infused gummies – in federal court. While information regarding the lawsuit is sparse, including who the maker of Stoney Patch even is, a cursory look at the packaging of the two products makes the basis for the lawsuit is reasonably clear:

However, Stoney Patch Kids is not alone in parodying traditional consumer goods for their marijuana (or cannabis, hemp, CBD, etc.) businesses. Hershey’s is well-known for protecting it’s goodwill through filing lawsuits for trademark infringement, including when marijuana brands “parody” or otherwise poke fun at Hershey’s products. For example, and with respect to the marijuana industry, Hershey’s has sued over brands such as Hashees (see, Hershey’s “Reeses” candies):

  v. 

Ganja Joy (compare with Hershey’s “Almond Joy”):

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and Dabby Patties (think, Hershey’s “Peppermint Patties”):

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Similarly, in 2017, Girl Scouts USA sent cease and desist letters advising companies immediately stop using the Girl Scout Cookies name to brand marijuana products. That same year, Tapatio Foods, LLC filed its own complaint in federal court against the makers of Trapatio, a cannabis-infused hot sauce.

Trademark infringement lawsuits are not restricted only to the sale of marijuana or infused products, however. Earlier this year, UPS sued defendants United Pot Smokers, UPS420, and THCPlant, which allegedly operate websites (upsgreen.com and ups420.com) which offer logistic and delivery services to cannabis companies. And just two weeks ago (July 2019), a Canadian company filed suit in federal court alleging a medical marijuana dispensary chain based in Tulsa, Oklahoma “willfully copied and is using a confusing similar imitation” of a logo it utilized in connection with children’s television programming since the 1990s. Judge for yourself:

Below we discuss the unique challenges faced by marijuana (as well as all cannabis) businesses that this case elucidates, and important considerations with respect to trademark litigation for dilution (specifically, tarnishment) of non-cannabis brands, to which all cannabis businesses should be attuned both before they establish their brands, and consistently throughout the life of their businesses.

I.  Trademarks and Trademark Litigation

Trademarks are words, symbols, or phrases – and can also include other aspects associated with a product or services, including packaging design and color – which are used to identify a specific provider of products and/or services, and to distinguish those products and/or services from those of others.

The primary goal of trademarks is to make it easy for consumers to distinguish between the source of a particular good or service. Because customers often rely on the shorthand afforded by trademarks when purchasing goods or services, businesses are strongly incentivized to invest in – and protect – the goodwill associated with their brand (and trademark(s) associated with that brand).

However, incredibly time-consuming and costly trademark litigation can result when any of the rights afforded a trademark holder are “infringed” upon by another person or entity utilizes the same, or a confusingly similar, trademark in the marketplace. Trademark litigation can also result when another person or entity utilizes the same or similar trademark in a way that “dilutes” the distinctive quality of the mark, either through blurring or tarnishment.

Tarnishment is a point of serious legal contention within the cannabis industry, because even if a marijuana company does not engage in acts which constitute infringement, that marijuana business may still be found liable under the theory of tarnishment simply by virtue of the mark-user being a marijuana business. That is, any association of an existing non-marijuana brand or mark (or mark/brand of another) with marijuana – whether it be considered a positive or negative association, tasteful or distasteful, embraced by consumers or rejected, or even if the two companies do not operate in the same geographical area – may result in liability on the part of the marijuana company for tarnishment.

II.  Tarnishment: Dilution of Trademarks By “Negative” Association

It is for this reason that tarnishment is a cause of action particularly relevant to the marijuana industry. Tarnishment occurs when another person or entity utilizes the same or a similar trademark in a way that casts the original mark in an unflattering, disreputable, or otherwise negative light. Dilution therefore reduces the trademark’s reputation as wholesome, reputable, or high-quality identifier of the owner’s products or services.

Traditionally, successful claims for tarnishment of trademarks have resulted when products or services are associated with sex, adult-entertainment, crime, and drugs. For these reasons, marijuana businesses (as well as cannabis, hemp, CBD, and other related businesses) should be especially attuned to the risks they face when selecting, and selling under, their own trademarks.

Additionally, (federal) trademark lawsuits based on tarnishment do not require the claimant to allege that there exists (a) competition between the owner of the mark owners, or (b) a likelihood of confusion, mistake, or deception with respect to consumers, which are elements which plaintiffs are required to prove in infringement (as distinguished from dilution) lawsuits. In authorizing courts to enjoin dilution, Congress intended “to protect famous marks from subsequent uses that blur the distinctiveness of the mark or tarnish or disparage it.” H.R.Rep. No. 374, 104th Cong., 1st Sess. 3 (1995); Ringling Brothers-Barnum & Bailey Combined Shows, Inc. v. B.E. Windows Incorporation, No. 96 CIV. 4758(SAS), 1996 WL 391886, *3 (S.D.N.Y. July 11, 1996).

Therefore, marijuana businesses must be aware of the risks they face not only within the cannabis-industry, but also – and more importantly in the context of tarnishment – with respect to trademarks that operate outside of the marijuana (as well as cannabis, hemp, CBD, etc.) industry.

A. Successful Claims for Dilution

Examples of successful claims for dilution include:

• Adults-R-Us (a sex-related website): Toys “R” Us v. Akkaoui, 40 U.S.P.Q.2d (BNA) 1836 (N.D. Cal. 1996)

Toys “R” Us, which company actually holds an array of trademarks ending with the phrase “R Us,” alleged the defendants in this case – AdultsRUs.com – were operating a retail website which featured “sexual devices and clothing,” which diluted their wholesome brand.

The court in that case agreed with the plaintiffs, holding: “‘Adults R Us'” tarnishes the ‘R Us’ family of marks by associating them with a line of sexual products that are inconsistent with the image Toys ‘R’ Us has striven to maintain for itself.”

• “Gucchi Goo” diaper bags: Gucci Shops, inc. v. R.H. Macy & Co., 446 F. Supp. 838 (S.D.N.Y. 1977)

Gucci, the popular high-end fashion label, sued to prohibit Fashioncraft Products, Inc. from manufacturing a $10 “diaper bag” with the following offending design: a diagonal stripe on both side panels consisting of green, red and green bands and, above the stripe, the silk-screened words “GUCCHI,” and below the stripe, the word “GOO.”

With respect to Gucci’s claim for dilution, the Court held: “[…] even if the ‘diaper bag’ is not in competition with the Gucci tote bag and there is no possibility of confusion between plaintiff’s goods and those of defendant, Fashioncraft’s imitation of the ‘GUCCI’ trademark and the Gucci stripe on an inexpensive ‘diaper bag’ dilutes the distinctive quality of plaintiff’s trademarks. For over 20 years, Gucci Shops has promoted its products as a symbol of highest quality and fashion. Certainly defendant’s use of similar marks on a ‘diaper bag’ would debilitate the potency of plaintiff’s mark.”

In short, the defendant’s associating the “Gucci” brand with a low-cost tote bag designed to hold diapers cast the Gucci brand in a sufficiently negative light so as to impose liability on the offending company.

B. Unsuccessful Claims for Dilution

Examples of unsuccessful claims include:

• “Chewy Vuiton” dog toys: Louis Vuitton Malletier SA v. Haute Diggity Dog, 464 F. Supp. 2d 495 (E.D. Va. 2006)

Popular high-end retailer Louis Vuitton (“LVM”) was unsuccessful in suing Haute Diggity Dog (“HDD”), a company which markets plush stuffed $10 toys for dogs under names that parody the products of other companies. HDD sells products such as Chewnel # 5, Dog Perignon, Sniffany & Co, and – as relevant here – Chewy Vuiton. LVM’s attorneys should have taken a cue from Gucci’s attorneys (see above), as the facts are largely similar between the two cases. However, Louis Vuitton’s attorneys were unsuccessful in their cause of action for dilution by tarnishment, failing to allege the connection between it’s products and inferior products.

Instead, the Plaintiffs weakly asserted the “Chewy Vuiton” products tarnish LVM’s marks by associating its brand with “inferior products”. The court held that LVM did not provide examples of actual tarnishment, nor any evidence that shows likely tarnishment. Instead, the court assessed, “Plaintiff provided only a flimsy theory that a pet may some day choke on a Chewy Vuiton squeak toy and incite the wrath of a confused consumer against Louis Vuitton.”

In that case, the court uniquely – and yet more cheekily – wrote: “This ‘dog of a case’ gave the Court a great amount of facts to chew upon and applicable law to sniff out. Nonetheless, having thoroughly gnawed through the record, this Court finds [… claims for tarnishment of] the Vuitton name are baseless, and without merit.”

• The Muppet character named “Spa’am”: Hormel Foods Corp. v. Jim Henson Prods., 73 F.3d 497 (2d Cir. 1996)

In Henson’s film “Muppet Treasure Island” released in 1996, Spa’am is the high priest of a tribe of wild boars that worships Miss Piggy as its Queen Sha Ka La Ka La. The name “Spa’am” is mentioned only once in the entire movie. Nevertheless, the court concluded that Henson intended to “poke a little fun at Hormel’s famous luncheon meat by associating its processed, gelatinous block with a humorously wild beast.”

Hormel sued, alleging that even comic association with an unclean “grotesque” boar will call into question the purity and high quality of its meat product. That is, Hormel claimed that linking its luncheon meat with a wild boar will adversely color consumers’ impressions of SPAM. However, the district court found that Spa’am, a likable, positive character, will not generate any negative associations. Moreover, contrary to Hormel’s contentions, the district court also found “no evidence that Spa’am is unhygienic or that his character places Hormel’s mark in an unsavory context.”

Additionally, the court included a discussion regarding the commerciality of Henson’s use of “Spa’am,” finding that Henson’s use of the “SPAM” trademark was not commercial – that is, Henson did not use SPAM (or Spa’am) primarily to sell more tickets to his movie, but more so to make a comedic commentary. The court stated, “Henson does not seek to ridicule SPAM in order to sell more of its competitive products; rather, the parody is part of the product itself. Without Spa’am, the joke is lost.” As the court explained, “[t]his is an important, even if not determinative, factor. ‘Dilution of this sort is more likely to be found when the alterations are made by a competitor with both an incentive to diminish the favorable attributes of the mark and an ample opportunity to promote its products in ways that make no significant alteration.’ Deere & Co. v. MTD Prods., Inc., 41 F.3d 39, 45 (2d Cir.1994).”

III.  Affirmative Defenses

Generally, defendants in trademark lawsuits assert three affirmative defenses: fair use, nominative use, and parody. A fair use defense will successfully protect against liability if a descriptive mark is used in good faith for its primary meaning, and only in a descriptive sense – not the meaning associated with any user’s particular mark. Nominative use occurs when the mark is used to identify the other brand (that is, not the user’s own product), and applies only under very narrow circumstances.

The third category, parody, can also be utilized to mount a successful defense against a trademark lawsuit, including one for tarnishment, if the user can demonstrate that there is an artistic and/or critical function for its use of the trademark owned by the claimant. Additionally, the less commercial the parody-use of the mark, the more likely courts are to agree that a particular parody should constitute a defense to a claim for trademark liability. (See, “The Muppet character named “Spa’am”: Hormel Foods Corp. v. Jim Henson Prods., 73 F.3d 497 (2d Cir. 1996),” above.)

However, t is important to consider the distinctions between “parody” and “satire.” While both parody and satire are constructs which use humor as a way to communicate a message to an audience, they are distinct and different both conceptually and in their applications: parody may constitute a defense to trademark liability; satire will not.

A.  Satire

Satire, briefly, and by definition, is “a way of using humor to show that someone or something is foolish, weak, bad, etc.”

Satire uses humor to offer commentary and criticism about the world, not the subject of the satire (in this case, a specific trademark or brand). Satire is generally not a defense to a trademark lawsuit.

B.  Parody

Parody, on the other hand, and by definition, is “a literary or musical work in which the style of an author or work is closely imitated for comic effect or in ridicule.”

Parody uses humor to offer commentary and criticism about the subject of the parody (here, the trademark or brand), not the world or another subject. Parody may constitute a defense to a trademark lawsuit.

IV.  Special Considerations for Marijuana Businesses

As explained above, because a business may be successfully sued for tarnishment on the basis of being associated with “drugs” – even without any evidence demonstrating that the two products compete in the marketplace, or that consumers are likely to be confused when purchasing the products and/or services – marijuana businesses must be especially careful not to dilute, intentionally or otherwise, any other brand that operates outside of the marijuana (as well as cannabis, hemp, CBD, etc.) industry.

It is absolutely critical that marijuana businesses (as well as other cannabis, hemp, CBD, and other related businesses) conduct wide-reaching searches prior to establishing their company name, brand, and intellectual property – including trademarks – to ensure that they do not (even unintentionally) infringe upon or dilute another’s mark. It is also important that cannabis companies remain vigilant while operating in the marketplace even after registering and utilizing a particular mark or set of marks, being especially sensitive to those which may confuse consumers or may dilute another’s brand.

Further, if your business is in any way considering imitating, mimicking, referencing, or in any way poking fun at an established company, brand, or mark, be sure to consult with an experienced trademark attorney such as Heidi Urness Law to minimize risks to the fullest extent, and ensure that your mark, as well as your use of the mark, fit squarely within the nuances of parody defense jurisprudence.