By Cheryl Beise, J.D.
But district court erred in cancelling METCHUP registration for nonuse.
A Louisiana federal district court properly found that Heinz Company’s mark MAYOCHUP for a ketchup and mayonnaise condiment sauce as a matter of law was not likely to cause confusion with an individual’s registered mark METCHUP for a sauce made of ketchup and mayonnaise or mustard, the U.S. Court of Appeals in New Orleans has held. Although the individual owns an incontestable trademark registration for METCHUP, since 2010 he only sold a few bottles of his product to customers who visited his nine-room motel or his adjacent used-car dealership in Lacombe, Louisiana. "It would be a coincidence to ever encounter both Mayochup and Metchup in the market, much less get confused about the affiliation, sponsorship, or origin of the two products," the appellate court said. However, the district court erred by granting Heinz’s counterclaim for cancellation of the METCHUP registration for nonuse. Given that even minor good-faith use can forestall abandonment, de minimis sales and sporadic use alone were not enough to mandate a conclusion that the individual did not made "use" of the mark under the Lanham Act. The trier of fact must decide whether the individual’s use of the METCHUP mark was bona fide use (Perry v. H. J. Heinz Company Brands, L.L.C., April 12, 2021, Graves, J.).
Dennis Perry is a Louisiana entrepreneur who claims that since August 2010 he has manufactured, bottled, and sold a mayonnaise and ketchup condiment sauce and a mayonnaise and mustard condiment sauce, both under the name "metchup," within the United States. Since 2011, Perry has owned a trademark registration for the mark METCHUP, in standard characters, in connection with "ketchup; mayonnaise; mustard." Perry sells Metchup exclusively from the lobby of his nine-room motel adjacent to his used-car dealership in Lacombe, Louisiana. Perry has produced only 50 to 60 bottles of Metchup, which resulted in sales of around $170 and profits of around $50. He owns www.metchup.com but has never sold Metchup online.
Heinz makes Mayochup, which is solely a blend of mayonnaise and ketchup. Around April 2018, Heinz launched a nationwide ad campaign to promote Mayochup. As part of the campaign, Heinz held an online naming contest where fans proposed names. A fan submitted Metchup, and Heinz posted a mock-up bottle bearing the name Metchup on its website alongside mock-up bottles for the other proposed names. Heinz never sold a product labeled Metchup.
In 2019, Perry sued Heinz for trademark infringement. In June 2020, the district court dismissed Perry’s claims, because it found that there was no likelihood of confusion between Mayochup and Metchup and no confusion caused by Heinz’s fleeting use of Metchup in advertising. The court also canceled Perry’s trademark registration after concluding that he had failed to prove that he had made lawful, non-de minimis use of the Metchup mark in commerce. Perry appealed.
Ownership of METCHUP mark. The Fifth Circuit began by finding that Perry’s METCHUP mark was valid. Since 2011, Perry has owned a federal trademark registration for the mark METCHUP, in standard characters, in connection with "ketchup; mayonnaise; mustard." Under the Lanham Act, Perry’s certificate of registration for his Metchup trademark is prima facie evidence of its validity. The PTO found that Perry’s Metchup mark had achieved incontestable status because it had been registered and used in commerce for over five years. Once a mark becomes incontestable, its federal registration constitutes conclusive evidence of its validity, subject only to the defenses enumerated in 15 U.S.C. § 1115, which includes the defense of abandonment.
Trademark infringement. The Fourth Circuit next reviewed the district court’s conclusion that there was no likelihood of consumer confusion between Perry’s METCHUP mark and Heinz’s MAYOCHUP mark and its advertising mockup of METCHUP. The court noted that a few digits of confusion weighed in favor of Perry. Since Metchup was a suggestive trademark, the type of mark weighed in his favor. It was undisputed that the parties’ condiment products were similar. In addition, the low price of the products (around $5 per bottle) could suggest that potential purchasers are less likely to exercise care when buying. Lastly, Heinz used the exact word Metchup on a mock-up bottle in online advertising.
However, other factors weighed decisively against a finding of confusion. While Perry and Heinz sold to potential condiment purchasers, to date they targeted different segments of this market. Perry has only sold his product to the travelers staying at his nine-room motel in Lacombe, Louisiana, and to visitors to his used car lot; neither location sold Heinz products. At the time Heinz used the name Metchup on a mock-up label, and as Heinz’s Mayochup currently stands in relationship to Perry’s Metchup, there was, and is, no market overlap, the court said. Perry’s online presence was limited to a Facebook page with pictures of Metchup bottles on it. Unlike Heinz, he never used the Internet for sales or large-scale advertising. While Heinz knew Perry had registered the METCHUP mark, under the circumstance, it was reasonable for Heinz to conclude that the mark was no longer in use. Finally, there was no evidence of actual confusion. Perry introduced expert testimony from Dr. Lucy Henke, a marketing professor, who opined that a typical consumer would confuse Mayochup and Metchup due to visual and auditory similarities between the two names. However, Dr. Henke neither presented consumer survey data nor provided an analysis of any data. Accordingly, the digits of outlet and purchaser identity, advertising media identity, defendant’s intent, and actual confusion all weighed in favor of Heinz.
The court agreed with the district court that no reasonable jury could find that Heinz’s use of Metchup in advertising or the sale of its own product, Mayochup, created a likelihood of confusion. "It would be a coincidence to ever encounter both Mayochup and Metchup in the market, much less get confused about the affiliation, sponsorship, or origin of the two products," the court said. The district court’s summary judgment of no infringement was affirmed.
Abandonment of METCHUP mark. The district court granted Heinz’s counterclaim for trademark cancellation because it found that Perry had, as a matter of law, abandoned his incontestable registration for METCHUP. The appeals court noted that a party claiming that a trademark has been intentionally abandoned bears a heavy burden. The Lanham Act provides that "[a] mark shall be deemed to be ‘abandoned’ … [w]hen its use has been discontinued with intent not to resume such use. The Act defines "use" as "the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark." 15 U.S.C. § 1127. The court observed that Section 1127 appears to impose two requirements—use in commerce and bona fide use or use not merely to reserve a right.
The Fifth Circuit identified several legal errors in the district court’s analysis. First, the district court found that Perry had abandoned his trademark because "[he] [ ] failed to produce any evidence to show any sales of METCHUP-branded products outside of Louisiana or to non-Louisiana residents." But the conclusion that Perry never used his mark in commerce because he cannot prove sales outside of Louisiana conflicted with recent Commerce Clause jurisprudence, according to the court. "A brief study of modern Commerce Clause cases reveals that seemingly de minimis intrastate activities can influence interstate commerce, be regulated by Congress, and thus count as uses in commerce for purposes of the Lanham Act," the court said.
Second, and more concerning, was that the district court misplaced the burden of proof. Perry testified that he sold Metchup to motel guests who come from "all over the place." Heinz had the burden to prove otherwise by presenting strict proof, which if failed to do. Finally, the district court also reasoned that Perry had failed to make "lawful, non-de minimis use" of the METCHUP mark. Heinz insisted that Perry’s use was unlawful because he failed to comply with state and federal food labelling regulations when he omitted required information from the Metchup labels. However, the Fifth Circuit pointed out that it has not adopted the unlawful use doctrine—the doctrine that failing to abide by all laws and regulations can turn what would otherwise constitute "use" into "non-use." The court saw no reason to adopt the doctrine here.
It was clear that Heinz failed to show that Perry abandoned the METCHUP mark due to complete nonuse. The court also found that the evidence did not require a finding that Perry abandoned his mark though de minimis use. The court reiterated that the Lanham Act’s framework imposes two requirements—use in commerce and bona fide use or use not merely to reserve a right. The court went on to explain that these requirements "have nothing to do with a threshold use or sales requirement, nor do they imply that trademark rights, however weak, will vanish if sales are slow." Considering the Lanham Act’s requirements and the more prevalent view that even minor good-faith use can forestall abandonment, de minimis sales and sporadic use alone were not enough to warrant a conclusion that Perry did not made "use" of the mark.
Nevertheless, the court found that in this case, Heinz created an issue of fact as to whether Perry’s use of the METCHUP mark was bona fide use or whether he was simply making sporadic use of the mark to maintain his trademark rights. Perry had a history of acquiring domain names with no intention of using them and with hopes of selling them for a profit. Such evidence suggested that Perry might have been doing something similar with the METCHUP trademark. In addition, Perry made next to no effort to grow the sales of Metchup. Thus, a reasonable jury could infer that Perry’s registration and use of the trademark was something other than a sincere, good-faith business effort and something more like a trap that Heinz unwittingly fell into. On the other hand, his efforts "could also be seen as a foundering business venture rather than a trademark trap," the court said. In any case, it was up to the finder of fact to decide Perry’s intent and credibility to determine whether his use of the METCHUP mark was bona fide use. The district court’s ruling on abandonment was reversed and the case remanded for further proceedings.
This case is No. 20-30418.
Attorneys: Brad E. Harrigan (Tolar Harrigan & Morris, L.L.C.) for Dennis Perry. Tracy Zurzolo Quinn (Holland & Knight, L.L.P.) for H. J. Heinz Company Brands, L.L.C. and Kraft Heinz Foods Co.
Companies: H. J. Heinz Company Brands, L.L.C.; Kraft Heinz Foods Co.
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