Trademark Trial and Appeal Board
Patent and Trademark Office (P.T.O.)
*1 KELLOGG COMPANY
NEW GENERATION FOODS, INC.
Opposition No. 72,638
March 3, 1988
By the Board:
J.D. Sams, L.E. Rooney and G.D. Krugman
New Generation Foods, Inc. (hereinafter New Generation) has applied to register "SPICER'S NUTRI-WHEAT" as a trademark for cereal and wheat-based snack food. [FN1]
Registration was opposed by Kellogg Company (hereinafter Kellogg) on the ground that New Generation's mark so resembles Kellogg's previously used and registered mark "NUTRI-GRAIN" for cereal-derived food product to be used as a breakfast food, snack food or ingredient for making food [FN2] as to be likely, when applied to New Generation's goods, to cause confusion, mistake or to deceive.
New Generation, in its amended answer to the opposition, denied the allegations therein. In addition to pleading a number of affirmative defenses, New Generation counterclaimed to cancel Kellogg's pleaded registration. As grounds for its counterclaim, it is asserted that the specimens submitted by Kellogg in support of its "NUTRI-GRAIN" application were specimens of boxes bearing the mark; that there was no indication on these boxes of the net weight of the product; that the only specification of the weight of any "NUTRI-GRAIN" product shipped by Kellogg in commerce prior to the application filing date was the gross weight indicated on the "air bills" which accompanied the shipment; that this omission of the net weight of the product on the boxes shipped by Kellogg prior to the application filing date constitutes non-compliance with the labeling requirements of the Food, Drug and Cosmetic Act; that Kellogg, although aware of its non-compliance with the labeling requirements of the Food Drug and Cosmetic Act, nevertheless continued to prosecute its application for the purpose of obtaining a registration to which it knew it was not legally entitled and that such conduct by Kellogg constitutes fraud on the Patent and Trademark Office.
Kellogg, in answering the allegations in the counterclaim, admitted knowledge of the pertinent requirements of the Food, Drug and Cosmetic Act and further admitted that the "air bills" affixed to the outside of the bulk packages for the goods stated the gross weight of the packages. Kellogg otherwise denied the allegations regarding unlawful use and fraud.
Kellogg then moved for summary judgment on the counterclaim on the grounds that there are no genuine issues of material fact regarding Kellogg's shipments of the "NUTRI-GRAIN" product prior to the application filing date; that said shipments were lawful shipments under applicable law and that there were no misrepresentations of omission or commission made to the Office which would constitute fraud.
New Generation filed a brief in opposition to the motion for summary judgment.
On November 17, 1987, the Board issued a ruling indicating that it believed no issues of material fact were in dispute. The Board noted that there was no disagreement as to the events that occurred prior to the filing date of Kellogg's "NUTRI-GRAIN" application regarding shipment of the goods in commerce and that it was clear that the shipments did not indicate the net weight of the product on the packages although there was an indication of the gross weight on the "air bills" accompanying the shipments. However, the Board held that while there were no material facts in dispute necessitating a trial on this issue, what is in dispute and what constitutes the crux of the counterclaim for cancellation and the motion for summary judgment to dismiss the counterclaim is the legal significance of these undisputed facts, that is, do the facts relating to the shipments constitute facts which warrant the conclusion that the shipments were unlawful? The Board then allowed New Generation time to file a brief on the legal issue of whether the undisputed facts relating to Kellogg's initial shipments of its "NUTRI-GRAIN" cereal in commerce was in compliance with applicable law and whether this asserted non-compliance was of such significance that any use of the "NUTRI-GRAIN" mark by Kellogg prior to the application filing date would be considered unlawful. Kellogg was allowed time to file a responsive brief. The Board indicated that if New Generation failed to demonstrate by clear and convincing evidence that the undisputed facts regarding Kellogg's first use of the "NUTRI-GRAIN" mark constituted such a material non-compliance with a regulatory statute as to render unlawful Kellogg's shipments of goods prior to the application filing date, the Board would dismiss the counterclaim by way of summary judgment. If, on the other hand, the Board was persuaded that the undisputed facts amounted to unlawful shipments, summary judgment would be entered on the counterclaim in favor of New Generation and Kellogg's registration would be cancelled.
*2 In response to the foregoing order, New Generation filed a brief together with supporting materials, urging that Kellogg's use of the "NUTRI-GRAIN" mark was not lawful and that Kellogg's registration should be cancelled. In support of its position, New Generation points to two statutes which govern the regulation of food products introduced into interstate commerce, namely the Food Drug and Cosmetic Act, 21 U.S.C. § 331 et seq. and the Fair Packaging and Labeling Act, 15 U.S.C. § 1451 et seq. New Generation also refers to the rules and regulations of the Food and Drug Administration, 21 C.F.R. § 100.120 et seq. and the rules and regulations of the Federal Trade Commission, 16 C.F.R. § 500.1 et seq., arguing that these are relevant to the shipments in question herein.
New Generation's position with respect to Kellogg's initial shipments of "NUTRI-GRAIN" cereal is that the introduction into interstate commerce of any food that is misbranded is a prohibited act (21 U.S.C. § 331(a)); that a food is deemed misbranded if it is in package form unless it bears a label containing, inter alia, an accurate statement as to the quantity of the contents in terms of weight subject to reasonable variations which shall be permitted and exemptions as to small packages which shall be established by regulations prescribed by the Secretary (21 U.S.C. § 343(e)(2)); that the reasonable variations referred to in the Food Drug and Cosmetic Act refer to specifically enumerated contingencies not applicable to packaged breakfast cereal and the exemptions referred to in the Act require regulations prescribed by the Secretary which have not been prescribed so as to make Kellogg's shipments lawful.
New Generation also points to the Fair Packaging and Labeling Act which provides that it shall be unlawful for any person engaged in the packaging or labeling of any consumer commodity for distribution in commerce to distribute such commodity in commerce if such commodity is contained in a package, or if there is affixed to that commodity a label, which does not conform with this Act (15 U.S.C. § 1452(a)). The Act further provides that no person shall distribute any such commodity in commerce unless the net weight of the contents is stated upon the principal display panel of the label (15 U.S.C. § 1453(a)(2)).
In view of the foregoing, New Generation concludes that since Kellogg's shipments indisputably were shipped in commerce without a label indicating the net weight of the contents, said shipments were not in compliance with applicable law; that they constitute a per se violation of the law and that these unlawful shipments cannot be relied on to support a federal registration.
*3 Attached to New Generation's brief are portions of the above referenced statutes.
Kellogg, on the other hand, asserts that the Fair Packaging and Labeling Act deals specifically with products moving through retail agencies to retail consumers; that Kellogg's "NUTRI-GRAIN" product was shipped to two market research laboratories and not to retail outlets; that, therefore, Kellogg's product was not a consumer commodity for purposes of the packaging and labeling requirements of the statute and that the product was not misbranded since it was not a consumer commodity. Kellogg concludes that while the law requiring labeling directed to consumers is clear on its face, it did not apply to Kellogg's "NUTRI-GRAIN" product at the time of the initial shipments.
New Generation has filed a brief in response to Kellogg's brief and Kellogg has filed a response to New Generation's response. [FN3]
After reviewing the biefs of the parties, together with the supporting documentary material, we conclude that New Generation has failed to demonstrate by clear and convincing evidence that Kellogg's shipments were violations of applicable law such that Kellogg's application is deemed void ab initio mandating cancellation of the resultant registration. As we stated in the case of Santinine Societa v. P.A.B. Produits, 209 USPQ 958 (TTAB 1981), the better practice in trying to determine whether use of a mark is lawful under one or more of the myriad regulatory acts is to hold a use in commerce unlawful only when the issue of compliance has previously been determined (with a finding of non-compliance) by a court or government agency having competent jurisdiction under the statute involved, or where there has been a per se violation of a statute regulating the sale of a party's goods.
In the present case, there has been no final determination of non-compliance by any competent court or agency regarding Kellogg's initial shipments of its "NUTRI-GRAIN" cereal. New Generation has not contended that such a determination has been made. Rather, New Generation has attempted to show that the initial shipments of the "NUTRI-GRAIN" cereal were per se violations of the Food, Drug and Cosmetic Act and/or the Fair Packaging and Labeling Act. We do not believe that any per se violations of the aforementioned statutes have been shown.
With respect to the Food, Drug and Cosmetic, Act this Act states in pertinent part that the introduction into interstate commerce of a food that is misbranded constitutes a prohibited act and that a food is deemed misbranded if in package form unless it bears a label containing, inter alia, the quantity of the contents in terms of weight. New Generation concludes that Kellogg shipped a quantity of cereal in interstate commerce in package form without the required label and that, therefore, the shipments were clearly unlawful. However, the regulations promulgated to enforce the provisions of the Food Drug and Cosmetic Act and the Fair Packaging and Labeling Act define a "package" as any container or wrapping in which any food is enclosed for use in the delivery or display of such commodity to retail purchasers, but does not include, inter alia, shipping containers or wrappings used solely for the transportation of any such commodity in bulk or in quantity to manufacturers, packers, processors or wholesale or retail distributors. See: 21 CFR 1.20. In this regard, the record shows that Kellogg's initial shipments were to two market research laboratories and not for retail sale to consumers. Kellogg submitted copies of its "air bills" of these shipments to the Examining Attorney during the ex parte prosecution of its application. It appears from the face of these "air bills" that the shipments were, in fact, directed to research services and were not for retail consumption. Moreover, there is nothing of record to dispute or contradict Kellogg's assertions that its shipments were anything other than shipments for testing of the product. [FN4] It appears from a reading of the pertinent provisions of the Food, Drug and Cosmetic Act and the regulations regarding labeling requirements under the Act that the underlying purpose of the labeling requirements is the protection of retail consumers. While we have been unable to find any case law on point, it does not appear that a shipment of a food product to a research laboratory would be considered misbranded if there was no indication on the package of the net weight of the contents since there does not exist in that situation the issue of consumer protection. In any event, while we readily concede some unfamiliarity with the applicability of the Food, Drug and Cosmetic Act and related regulations regarding shipments of the type involved herein, we conclude that New Generation has fallen far short of demonstrating, by clear and convincing evidence, that Kellogg's shipments were per se violations of said statute and regulations.
*4 Similarly, with respect to the asserted violation by Kellogg of the Fair Packaging and Labeling Act, this statute, which sets forth certain packaging and labeling requirements of consumer commodities, defines the term "consumer commodity", inter alia, as any food customarily produced or distributed for sale through retail sales agencies or instrumentalities for consumption by individuals. See: 15 U.S.C. § 1459. The same section of the Act defines "package," inter alia, as any container or wrapping in which a consumer commodity is enclosed for use in the delivery or display of that consumer commodity to retail purchasers. Section 1451 of the Act, declaring the policy of Congress, indicates that the purpose of the Act is to provide packages and labels that enable consumers to obtain accurate information as to the quantity of the contents and enable consumers to make value comparisons. With respect to Kellogg's shipments to product evaluation laboratories, we believe that, at the very least, these shipments arguably were not shipments of "consumer commodities" as that term is defined in the Fair Packaging and Labeling Act and that the absence of net weight labels on the packages in question did not violate said Act. Moreover, as was the case with the Food, Drug and Cosmetic Act, we find that New Generation clearly has failed to demonstrate, by clear and convincing evidence, that Kellogg's shipments of "NUTRI-GRAIN" cereal were per se violations of the Fair Packaging and Labeling Act.
Under the circumstances, since New Generation has failed to demonstrate, pursuant to the Board's November 17, 1987 ruling, that Kellogg's shipments of "NUTRI-GRAIN" cereal were unlawful, summary judgment is hereby entered against New Generation with respect to the counterclaim. The counterclaim to cancel Kellogg's pleaded registration is hereby dismissed and proceedings will go forward in the opposition.
We now turn to Kellogg's outstanding motion to quash New Generation's notice to take depositions and produce documents. The notice of deposition names, among others, William LaMothe, Kellogg's Chief Executive Officer, as a person to be deposed and Kellogg asserts that this proposed deposition is solely to harass and annoy Kellogg. The notice of deposition also identifies one W.T. Lambert who, Kellogg states, is no longer in Kellogg's employ.
New Generation has filed a brief in opposition to the motion, making no comment on the notice of deposition with respect to W.T. Lambert. In this regard, it is clear that Kellogg cannot be compelled to produce a deponent not in Kellogg's employ and W.T. Lambert's deposition may only be taken pursuant to Lambert's voluntary appearance or pursuant to a subpoena issued by the U.S. District Court having jurisdiction over Lambert.
With respect to the motion to quash the notice of deposition as it relates to Mr. LaMothe, New Generation denies that said notice of deposition is for the purpose of harassing Kellogg. Rather, New Generation asserts that it has repeatedly sought to obtain the name of any person who is authorized to discuss an amicable settlement of this dispute; that these attempts to bring together properly authorized individuals of both parties who would be in a position to discuss the disputes herein have been rejected by Kellogg; that when New Generation asked Kellogg if there was anyone in Kellogg's organization who had authority and knowledge to discuss settlement of the case, Kellogg indicated, through its counsel, that it did not know of any person who could meet with New Generation's officers to discuss an amicable resolution of this case; that it is obvious that Kellogg's Chief Executive Officer would have the knowledge and authority to discuss settlement and that New Generation is forced to depose Kellogg's Chief Executive Officer in order to obtain necessary information regarding settlement which, according to Kellogg, cannot be provided by any other individual in the Kellogg organization. New Generation further asserts that it would accept an alternative person(s) in lieu of the Chief Executive Officer if such person(s) was designated by Kellogg.
*5 As the parties are well aware, the scope of discovery in inter partes cases before the Board is governed by Rule 26(b) FRCP which provides that a party may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action. If the information sought appears reasonably calculated to lead to the discovery of admissible matter, it is not grounds for objection that the information sought will be inadmissible at trial. While the purpose of discovery in any adversary proceeding is to develop the facts prior to trial, simplify the issues and, possibly, promote an amicable settlement of the dispute once the facts are known, a party is under no requirement to settle a case and is under no requirement to negotiate settlement with its adversary.
In the present case, New Generation has cited no authority (and the Board's knows of none) for the proposition that it is entitled to utilize the device of a discovery deposition to force Kellogg to produce a deponent who has the authority to negotiate a settlement of the case. New Generation's claims that it is forced to depose Kellogg's Chief Executive Officer in order to obtain information regarding settlement is simply baseless and cannot be countenanced by the Board.
In view of the foregoing, the motion to quash is granted and the notice of deposition served on Kellogg on June 12, 1987 is hereby quashed. [FN5]
Trial dates, including the time for discovery, are reset as shown in the accompanying trial order.
J. D. Sams
L. E. Rooney
G. D. Krugman
Members, Trademark Trial and Appeal Board
FN2. Registration No. 1,255,456 issued October 25, 1983.
FN3. Kellogg has moved to strike New Generation's reply brief on the ground that the Board's November 17, 1987 order made no provision for the filing of reply briefs. Kellogg alternatively requests that its response to New Generation's reply brief be considered in the event that the Board denies the motion to strike.
While it is true the Board's November 17, 1987 order made no specific reference to reply briefs, there was no prohibition against them. As always, the Board prefers that reply briefs not be filed unless necessary but the Board, in its discretion, reserves the right to consider them. In the present case, the Board elects to consider both New Generation's reply brief and Kellogg's brief in response thereto. Accordingly, the motion to strike is denied.
FN4. New Generation, in its reply brief, argues that Kellogg's representation that the initial shipments of "NUTRI-GRAIN" cereal were for market testing purposes and not for retail consumption is directly contrary to the representation made by Kellogg in its application wherein it was indicated that the mark is used by applying it to containers in which the goods are packaged and sold and specimens showing the mark "actually used" were presented. New Generation urges that this representation to the Office that the mark was being used on packages sold to the public was a deliberate misrepresentation to the Office constituting fraud and that, at the very least, the shipment was not for any legitimate commercial purpose, but, rather, was a sham transaction which would be insufficient to support registration of the "NUTRI-GRAIN" mark.
The Board disagrees with New Generation's contentions. It is clear from a review of the registration file that Kellogg, in requesting reconsideration from the Examining Attorney's final refusal, indicated to the Examining Attorney the facts regarding the shipments of the cereal to the consumer laboratories for product evaluation and clearly indicated that the shipments were not for retail sale. Accordingly, no fraud or misrepresentation occurred which resulted in allowance of Kellogg's registration. Moreover, such product evaluation shipments would be considered sham transactions only if it was demonstrated that the initial shipments were not subsequently followed up within a reasonable time by ongoing commercial activity. No such absence of subsequent activity has been suggested by New Generation and the Board, therefore, rejects New Generation's contentions regarding the character of Kellogg's initial shipments.
FN5. In the hope of avoiding further disputes regarding the taking of discovery herein, it is emphasized that New Generation is entitled to take discovery depositions pursuant to Rule 30(b)(6) regarding any and all issues involved in this proceeding. Kellogg is obligated to produce those witnesses having knowledge over the subject matter on which examination is requested. The parties are urged to cooperate in the completion of discovery and in the remainder of this proceeding so that the case may proceed expeditiously.