On June 14, 2018, the U.S. District Court for the Northern District of
Illinois granted summary judgment in favor of PepsiCo, Inc. and its subsidiary,
The Gatorade Company (“Gatorade”), against the trademark infringement claims brought
by SportFuel, Inc. (“SportFuel”), the owner of the registered trademark
SPORTFUEL, over Gatorade’s use of the advertising slogan “The Sports Fuel
Company.” SportFuel, Inc. v. PepsiCo, Inc. et al, Case No. 16-cv-07868 (N.D. Ill. 2018) (decision here).
SportFuel is a Chicago-based sports nutrition and wellness consulting
firm that also sells a variety of SportFuel-branded dietary supplement powders
and capsules. SportFuel owns two
registered trademarks for the name SPORTFUEL – one for “food nutrition
consultation,” “nutrition counseling,” and “providing information about dietary
supplements and nutrition” (U.S. Trademark Registration No. 3,495,513)
and another for “dietary supplements” and “sports drinks enhanced with vitamins”
(U.S. Trademark Registration No. 4,832,297).
Gatorade began using the phrase “sports fuel” internally in 2012 in
marketing presentations describing their “Sports Fuel” products (which it
defined as products designed to improve athletic performance in contrast to sports
nutrition products) and describing the growing “Sports Fuel” product market. In 2015, with full knowledge of SportFuel’s
trademark rights, Gatorade began a nationwide rebranding campaign using the
slogan “Gatorade The Sports Fuel Company.” Gatorade obtained a trademark registration for
GATORADE THE SPORTS FUEL COMPANY in 2016 (Reg. No. 5,025,026)
– although it included a disclaimer of any exclusive rights to “The Sports Fuel
Company” apart from the mark as shown in response to an office action which found
“The Sports Fuel Company” to be merely descriptive. Gatorade maintained that it did not use the
slogan on any product packaging or labeling – rather, its products used the GATORADE
trademark or the G-bolt
design mark.
SportFuel filed its lawsuit against Gatorade and PepsiCo in August
2016 alleging causes of action for trademark infringement, unfair competition,
and false designation of origin in violation of the Lanham Act as well as
related claims of trademark infringement and unfair competition under state law
and common law. Gatorade filed a motion
for summary judgment on all of SportFuel’s claims on two separate grounds – 1) SportFuel
has not presented evidence from which a reasonable jury could find likelihood
of confusion (a necessary element to all of SportFuel’s claims) and 2) Gatorade’s
use of the term “Sports Fuel” in the slogan “Gatorade The Sports Fuel Company”
is protected under the fair use doctrine.
The court granted Gatorade’s motion entirely on the grounds of fair use
and did not address the likelihood of confusion argument.
The court first identified the fair use defense and its elements:
Under section 1115(b)(4) of Lanham Act, however, the “fair use” defense allows a junior user of a mark to use the mark “in good faith in its descriptive sense, as opposed to its trademark sense.” Ideal Indus., Inc. v. Gardner Bender, Inc., 612 F.2d 1018, 1027 (7th Cir. 1979); see also 15 U.S.C. § 1115(b)(4); Sorensen v. WD-40 Co., 792 F.3d at 722. The fair use defense “is based on the principle that no one should be able to appropriate descriptive language through trademark registration.” Packman, 267 F.3d at 639 (citation omitted). To prevail on a fair use defense, the defendant must show that (1) it did not use the mark as a trademark; (2) the mark is descriptive of the defendant’s goods or services, and; (3) it used the mark “fairly and in good faith.” Sorensen, 792 F.3d at 722.
With
respect to the first element of the fair use defense – showing that it did not
use “Sports Fuel” as a trademark – Gatorade argued that it used the term “Sports
Fuel” in its slogan “Gatorade The Sports Fuel Company” to describe the type of
products it sells rather than to signify the source of the products. Even though there was no dispute that Gatorade
uses its name and G-bolt design mark on its product packaging and advertising,
this did not preclude a finding that Gatorade’s use of the words “Sports Fuel” could be viewed as a
source identifier of Gatorade’s products.
Nonetheless, in analyzing Gatorade’s actual use
of the slogan “The Sports Fuel Company,” the court focused heavily on how the
word “Gatorade” typically
appeared above the slogan and in a much more noticeably larger and bolder font. And in those instances where the word “Gatorade” appeared on
the same line and in the same font as the slogan, the word “Gatorade” was bolded so that it would stand out from the slogan.
The court found
that “The fact that the Gatorade house mark appears more prominently than the
rest of the slogan reduces the likelihood that Gatorade is using “Sports Fuel”
as an indicator of source.” The court
rejected SportFuel’s argument that a Gatorade executive had admitted using “Sports
Fuel” as a trademark given that he was not a trademark expert and just giving
an opinion. Moreover, the fact that
Gatorade had sought to register “Gatorade The Sports Fuel Company” as a
trademark did not change the court’s analysis given Gatorade’s express
disclaimer of “The Sports Fuel Company” as part of its trademark registration.
With
respect to the second element of the fair use defense – showing that Gatorade’s
use of “Sports Fuel” was in a manner which is descriptive of its goods or
services – Gatorade’s argument that its use of “Sports Fuel” would clearly be recognized
by consumers as descriptive of “foods and beverages designed to be consumer before,
during, or after sports activity” was bolstered by the fact that the PTO had
also determined that the phrase “The Sports Fuel Company” was descriptive and
had to be disclaimed by Gatorade in its trademark registration application (“As
SPORTS FUEL is commonly used in reference to sports nutrition, consumers
encountering the wording THE SPORTS FUEL COMPANY in the proposed mark would
readily understand it to mean that the goods are provided by a company that
provides sports nutrition.”). In addition, Gatorade’s internal marketing documents
regarding the slogan “The Sports Fuel Company” had identified “Sports Fuel
products” as “[i]tems specifically designed to improve athletic performance.” As such, the court found that Gatorade’s use
of “Sports Fuel” was in a manner which is descriptive of its goods or services
and further found that SportFuel had not presented any evidence giving rise to
a genuine factual dispute regarding whether Gatorade used the term “Sports Fuel”
to describe the nature of the products it sells.
Finally,
with respect to the third element of the fair use defense – showing that
Gatorade used “Sports Fuel” fairly and in good faith only to describe its own
goods or services – Gatorade argued that there was no genuine factual issue in
dispute given that “sports fuel” did accurately describe Gatorade’s expanded
product line, Gatorade disclaimed exclusive rights to “The Sports Fuel Company”
in its registered trademark, and the concurrent use of its famous GATORADE mark
and/or G-bolt design mark in conjunction with the advertising slogan left no
doubt regarding the source of Gatorade’s products.
SportFuel
tried to argue that summary judgment was not warranted on the issue of Gatorade’s
intent and good faith because Gatorade was aware of SportFuel’s marks prior to beginning
public use of its slogan and because Gatorade did not stop using the slogan
even after SportFuel had put Gatorade on notice regarding its claims of
infringement. However, the court held
that “evidence that Gatorade had knowledge of SportFuel’s mark is insufficient
to permit a reasonable inference of bad faith” and Sport Fuel “must point to
something more that suggests subjective bad faith.” Further, the court held that “the fact that
Gatorade did not stop using the slogan after SportFuel filed this lawsuit
alleging infringement is not probative of bad faith” since Gatorade believed
its use did not constitute infringement and there had been no prior adjudication
of the issue. The court found that SportFuel
failed to offer any evidence that would support a reasonable inference that
Gatorade acted in bad faith.
The court
concluded that even with all reasonable inferences drawn in SportFuel’s favor, “no
reasonable jury could find that Gatorade’s use of the phrase “Sports Fuel” in
its slogan “Gatorade The Sports Fuel Company” is anything other than a fair use.” As such, the court concluded that Gatorade’s
use of “Gatorade The Sports Fuel Company” is protected under the fair use
doctrine and granted summary judgment in Gatorade’s favor on all of SportFuel’s
claims. And having granted summary
judgment based on fair use, the court chose not to address the parties’
arguments on the issue of likelihood of confusion. See KP Permanent Make-Up, Inc. v.
Lasting Impression I, Inc., 543 U.S. 111, 124 (2004) (a defendant
invoking the fair use defense need not establish that its use of the mark in
question will not cause consumer confusion).