Tag: IP


PepsiCo: Serial Trademark Infringer or Coincidence?


On June 15, 2021, a food startup named Rise Brewing filed suit against PepsiCo in the U.S. District Court for the Northern District of Illinois. The startup has begun to make a name for itself by selling canned cold-brew coffee. Rise Brewing has alleged that the well-known company PepsiCo has infringed on their trademark with their recent launch of a Mountain Dew-branded energy drink called Rise.1

 

History of Infringement

According to Forbes, the notorious food, snack, and soda company, PepsiCo, is valued at an astounding $18.2 billion.2 PepsiCo has had its fair share of trademark infringement cases in the past, where they have been sued by brands such as VitaminWater, Polar seltzer, and Simply Orange Juice.

 

A more recent lawsuit was filed in the United States District Court for the Southern District of Texas, where a temporary nationwide restraining order had halted PepsiCo’s release of a Gatorade product called Gatorlyte. The order had been issued due to a sports beverage named Electrolit made by a Mexican company.

 

According to Laboratorios Pisa S.A. de C.V. v. PepsiCo, Inc., PepsiCo allegedly copied the Mexican companies’ product packaging. Before the issuance of the restraining order, PepsiCo shipped roughly $1.7 million worth of Gatorlyte after spending $1.3 million on media and $18 million of product development. 3 The Court considered three facts in determining whether recall of the product, which was already rolled out nationwide, was justified. These three factors were “(1) the willful or intentional infringement by the defendant; (2) whether the risk of confusion to the public and injury to the trademark owner is greater than the burden of the recall to the defendant; and (3) substantial risk of danger to the public due to the defendant’s infringing activity.”4

 

The Court reasoned that “recall is an extreme remedy” and “therefore they did not find sufficient indicia of willful infringement, confusion to the public that outweighs the onerousness of a recall, or a sufficient risk of danger to the public to justify a full recall of GATORLYTE” at the time of the case.5

 

The Court then turned to the balancing of the parties’ hardships. The Court stated that although PepsiCo’s investments were significant, the Court did not find that a temporary restraining order would affect the investments to such a degree that would be problematic. Additionally, PepsiCo decided to release their product line despite the initial issuance of a Temporary Restraining Order and the then-pending hearing on another Temporary Restraining Order. The Court turned to the Mexican companies’ argument that PepsiCo was aware of the rights in the Electrolit trade dress, so PepsiCo, therefore, accepted all risks of infringement. Trade dress is the look or feel of the product, in this case, Electrolit’s trade dress was their companies protected product packaging.

 

The two companies reached a confidential settlement earlier this spring, ending the case permanently and, therefore, lifting the temporary restraining order.

 

U.S. District Court for the Northern District of Illinois

 

On June 15, 2021, Rise Brewing Company (hereinafter “Rise Brewing”) filed a trademark infringement lawsuit against PepsiCo, alleging that PepsiCo has infringed on their trademark with their recent launch of a Mountain Dew-branded energy drink called Rise.6 The issue in the complaint arose out of the energy drinks use of the word “Rise,” written horizontally across the top of the can, in a fashion almost identical to Rise Brewing.

 

Rise Brewing created a canned caffeine drink that lacks the chemicals, dairy, fat, and sugar commonly associated with traditional energy and coffee drinks. The brand features the words RISE horizontally across the can, with Brewing Co. located just underneath. Shortly before the complaint was filed, PepsiCo released its own RISE-branded caffeine drink. Rise Brewing alleged the PepsiCo brand marketed itself as a morning caffeinated beverage to replace ready-to-drink coffee drinks such as RISE.

 

Rise Brewing alleges that PepsiCo’s actions are causing “reverse confusion” in violation of the Lanham Act. Traditionally, in a trademark infringement case, the defendant is the “junior user” of the mark, and the plaintiff is the “senior user.” This type of trademark infringement causes consumers to believe the defendant or its products are associated with the plaintiff or its products. Here, Rise Brewing alleges that it is the opposite. In a reverse confusion case, the consumer confusion for association goes the other way. Meaning, due to PepsiCo’s size, reputation, and power, consumers are confused into thinking that Rise Brewing’s RISE drinks are associated with PepsiCo.

 

The concept of reverse confusion was established in Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co.7 In that case, the Court stated that it was essential to recognize something other than traditional confusion to prevent “anyone with adequate size and resources [from] adopt[ing] any trademark and develop[ing] a new meaning for that trademark as identification of the second user’s products.”8 Rise Brewing alleges this case is a classic case of reverse confusion, demonstrating what the Big O court was trying to prevent.

 

Rise Brewing owns multiple valid registered trademarks with the United States Patent and Trademark Office (“USPTO”), as shown below.

 

 pepsiCo case header pepsiCo case details pepsiCo case full case

 

Chart demonstrating Rise Brewing’s registered trademarks

 

Rise Brewing’s trademark registrations are valid and in full force and effect. It claims to use its RISE Marks through extensive advertising, marketing, and sale of goods bearing the marks. Because of this, Rise Brewing claims that the RISE Marks have become invaluable assets of the Rise Brewing Company, serving as a symbol of their high-quality product.

 

Rise Brewing would like the court to enter preliminary and permanent injunctions restraining PepsiCo and all of its affiliates from the continued use of its trademark, to recover its costs and reasonable attorneys’ fees, in an amount to be determined, and various amounts of awards for damages and profits.

 

Following the guidance of previous cases involving PepsiCo’s trademark infringement, Rise Brewing will likely be granted a preliminary injunction and/or grant damages sought. Rise Brewing has built its company from the ground up, creating and protecting their ideas through the use of registered trademarks. PepsiCo’s power in the market is far greater than Rise Brewing’s. The ability for large companies to prey on the hard work of smaller companies should be carefully monitored and regulated by the courts. This fact pattern is remarkably similar to previous cases filed by smaller companies, like Gatorlyte, against PepsiCo, where the smaller company has almost regularly been granted an injunction. The timing of this case makes it quite difficult for Rise Brewing because of the sheer amount of money that was put into the launch by PepsiCo. Because of this, it is more likely that the court will grant damages from this case, or in the chance PepsiCo would like to settle, Rise Brewing could possibility recover at least a small portion of the money PepsiCo will have made from their product launch. In the event of a settlement, like previous cases, the terms will likely remain confidential. If PepsiCo would like to continue to use the word Rise, Rise Brewing could also offer license to PepsiCo. This case is another example that reverse confusion is still present, despite the Big O court’s precedent.

 

Conclusion

As the case continues, it is essential to remember how valuable intellectual property (patents, trademarks, copyrights, trade secrets) is. Intellectual property, and its protections, foster growth and discovery, allowing for expanding new technology and resources worldwide.

 

1 See RiseandShine Corp. v. PepsiCo Inc., Case No. 1:21-cv-03198.

 

2 FORBES (Jun. 29, 2021), https://www.forbes.com/companies/pepsi/?sh=24c9d6a2bc31.

 

3 CASETEXT (Jun. 29, 2021), https://casetext.com/case/laboratorios-pisa-sa-de-cv-v-pepsico-inc/?PHONE_NUMBER_GROUP=C.

 

4 Id.

 

5 Id.

 

6 See RiseandShine Corp. v. PepsiCo Inc., Case No. 1:21-cv-03198.

 

7 Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., 561 F.2d 1365 (10th Cir. 1977).

 

8 Id. at 1372.



Can Crypto-Currency Revolutionize the Music Industry?


It was only a matter of time before cryptocurrency [1] pervaded the music industry.  The proliferation and potential applications of blockchain seem to be the perfect fit for the challenges struggling musicians face.  While musicians are the creators of their art, it’s the record labels that distribute the music who tend to own the songs.  It is for this reason Paul McCartney has now been fighting for 40 years for the rights to The Beatles albums.[3]  As technology evolves, some crafty music executives have been devising new ways for musicians to protect and sell their songs.

 

Paul McCartney and Michael Jackson
Paul McCartney and Michael Jackson from 1983—before McCartney sold Jackson a significant amount of the rights to The Beatles Catalog 

 

The Crypto Solution

 

Hakim Draper, cofounder of Boogie Shack Music Group, has been creating a new means for every artist in the music industry to have their very own digital currency.  Boogie Shack has teamed up with Tao Network, a blockchain-based content distribution platform for the music industry, and plans to use XTO tokens (XTO = Tao Network’s abbreviation for it’s cryptocurrency) to create a unique currency for music artists.  Each artist will be able to sell rights to their songs in exchange for XTO tokens.[4]

Tao Network’s Logo for their Crypto-Currency, the currency itself is also referred to as XTO
Tao Network’s Logo for their Crypto-Currency, the currency itself is also referred to as XTO

 

The potential for musician’s intellectual property (IP) to be converted into monetized data will serve as a direct pipeline between artists and their fans.  Artists and fans may very well collaborate on songs, merchandising, and tours, meaning the level of fan involvement will directly correlate to an artist’s success.  The more artists rely on other funding sources, the more of their rights they are forced to give away.  This has the potential to be a great step forward for artists in the music industry assuming that the fans who support these artists using cryptocurrency will have the artist’s best interests in mind.  It should also be noted that cryptocurrencies such as XTO—especially in their early phases with limited funding—are controlled by a very small number of people who could potentially thwart/control the artist.  It should also be noted—even despite all the traction it has been gaining—cryptocurrency is not regulated by the SEC, so it is new ground that many are skeptical about.  There has been no legal entity or other organizational form that governs and protects the ongoing developments and ensures fair decision-making for cryptocurrencies in the United States.[5]

 

Current Issues in the Music Industry

 

Most issues stem from the complexities around who “owns” a song.  Ownership is critical as it secures the right to royalties for any use of the song for the owners fortunate enough to be royalty holders.[6]  As we are in the year 2018, it’s not surprising that streaming has emerged as the most important source of incoming royalties representing 62% of royalty revenue in 2017 (worth about $5 billion).  Record companies tend to walk away with the lion’s share of revenue, while only the most popular artists and songwriters gain relatively small sums of money relative to the popularity of their output.  To put it in perspective, struggling artists have complained that a million listens on a streaming service are worth about $100 to the writer of the song once the music industry has taken its cut.[8]

 

Other Music Cryptos are starting to Join the Mix

 

There are a few blockchain-based solutions that exist for paying musicians via crypto-currency.  Bitmark—a crypto startup that uses blockchain technology to enable property rights for digital assets—has partnered with Asia’s largest streaming platform KKBOX to create a mechanism for artists to see instant payments when their songs are streamed on the service.[9]

 

Another huge startup crypto contender in the blockchain world goes by the name of Vezt.  The Los Angeles-based blockchain startup brought in its funds via initial coin offering (ICO) worth $4.7 million, which it’s planning to use to launch its royalties management platform.[10]  The team at Vezt has already landed the rights to some 30 songs from music icons: Dr. Dre, Kanye West, Jay-Z, John Legend, and Drake.

 

The platform allows the rights holder to a song to sell their portion of the rights through an initial song offering (ISO).  Artists and rights holders can then choose how much they would like to raise from a fraction of their song, set the reversion term and set a date for the ISO.[11]  Rights are purchased with the tokens issued by Vezt.  Musicians are paid with the funds from the crypto offering (after Vezt takes its cut), and the digital rights to the song move to the buyer’s Vezt digital wallet.  The song rights information is encoded on Vezt’s blockchain, and the startup will distribute purchaser royalties and allow users to store profits on the platform.[12]  It should be noted that changing those profits out of Vezt tokens and into fiat currency, or even another form of digital currency, comes with a fee of at least 5%.

 

Music Industry and Cryptocurrency

 

Where do Music Cryptos Currently Stand?

 

Vezt still has a long way to go before it makes a name for itself among the ASCAPS and the BMIs.  Drake and J. Cole’s, “Jodeci Freestyle” (strong verse from a younger Cole very Born Sinner) became the first song to ever be featured as an ISO as a Beta test for Vezt last November.[13]  However, Drake only offered 10% of the publishing of the song, not the actual master, which means artists are still hesitant to go all in on the platform.[14]

 

At this stage it is an interesting idea, but one that is not likely to make a lot of money for either artists or investors in the near future until it gains some serious traction.  While the current generation of musicians may not become fully acclimated with crypto currency, it is most certainly likely to only gain in popularity among the younger generations.  In other words, as musicians from younger generations become pertinent, IP will be more commonly valued as monetized data.  Thus, musicians and the music industry alike are looking forward to seeing how monetizing data will impact (and potentially revolutionize) the Intellectual Property industry as a whole.

 

[1] A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

[2] A digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.

[3] Jonathan Stempel, Paul McCartney settles with Sony/ATV over Beatles music rights, Reuters Entertainment News (June 30, 2017), https://www.reuters.com/article/us-people-paulmccartney/paul-mccartney-settles-with-sony-atv-over-beatles-music-rights-idUSKBN19L2ET.

[4] Lisa Abeyta, How Cryptocurrency and Blockchain Will Revolutionize the Music Industry, Inc.com (November 17, 2017), https://www.inc.com/lisa-abeyta/how-cryptocurrency-blockchain-will-revolutionize-music-industry.html

[5] Stuermer, M., Abu-Tayeh, G. & Myrach, T. Sustain Sci (2017) 12: 247. https://doi.org/10.1007/s11625-016-0412-2.

[6] Id.

[7] Id.

[8] Id.

[9] Ian Allison, Bitmark partners with Asia’s biggest streaming service KKBOX for music rights and royalties, International Business Times (January 11, 2018), http://www.ibtimes.co.uk/bitmark-partners-asias-biggest-streaming-service-kkbox-music-rights-royalties-1654831.

[10] See https://vezt.co/.

[11] See https://vezt.co/.

[12] Id.

[13] Max Greenwood, Vezt Wants You to Buy Rights to Drake’s Music with Blockchain, Techvibes (November 15, 2017), https://techvibes.com/2017/11/15/vezt-wants-you-to-buy-rights-to-drakes-music-with-blockchain-technology.

[14] Id.