Trademark dispute between Splenda, Applebees and IHOP to continue

A trademark dispute between the owners of the Splenda sweetener brand and the Applebee’s and IHOP franchises will continue after a district court judge denied the restaurants’ motion to dismiss on Thursday.

Heartland Consumer Products LLC and TC Heartland LLC, the plaintiffs in the instant case, purchased the Splenda brand in 2015, and with that purchase came several design trademarks that protected the artificial sweetener’s yellow packaging color. Meanwhile, DineEquity, Inc. – which owns and operates Applebee’s and IHOP – began selling an off-brand artificial sweetener that was distributed in similar yellow packaging.

When Heartland learned of the restaurants’ artificial sweetener, it began an investigation. Hired investigators traveled to Applebee’s and IHOP franchisees around the country. At 46 of those locations, restaurant staff represented that the sweetener they were offering to customers was Splenda.

Further, Heartland interviewed DineEquity’s customers, and many of those customers indicated they were confused as to whether they were using Splenda or the off-brand sweetener when they visited an Applebee’s or IHOP. Thus, Heartland filed a complaint in the U.S. District Court for the Southern District of Indiana, alleging trademark infringement, false designation of origin, unfair competition and trademark dilution.

DineEquity, its restaurants and the restaurants’ franchisors moved to dismiss the suit, arguing the yellow packaging color served a functional purpose – distinguishing the sweeteners as sucralose, rather than sugar or another low-calorie sweetener. The defendants also argued Heartland failed to provide sufficient notice to each individual defendant as to their alleged wrongdoing.

But, Judge Sarah Evans Barker rejected both of those arguments Thursday in her opinion in Heartland Consumer Products LLC and TC Heartland LLC v. DineEquity, Inc., et al., 1:17-cv-01035.

Under precedent in Qualitex Co. v. Jacobson Prod. Co., Inc., 514 U.S. 159, 162 (1995), “color alone can serve as a protectable trademark feature if it develops secondary meaning and does not serve a functional purpose that would place competitors at a non-reputational disadvantage,” Barker wrote. The complaint’s allegations supported the inference that Splenda’s yellow packaging served only to signify that the contents are Splenda, she said.

Further, Heartland’s claims against the numerous defendants allege each of the defendants participated in and were responsible for infringing activities, a plausible allegation, Barker said.

“Whether any of the Defendants did or did not engage in infringing activity will emerge, we trust, through the discovery process,” the judge wrote. “Thus, despite its collective references to all of the Defendants, Heartland’s Complaint satisfies Rule (Federal Rule of Civil Procedure 8’s) notice pleading requirements.”

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