The Supreme Court unanimously found that a Minute Maid juice product of The Coca-Cola Company, labeled in large type as “Pomegranate Blueberry,” and depicting a pomegranate and blueberries prominently on the package, but containing only about 0.5% of these juices, is deceptively labeled.  While that might appear to be a “common sense” judgment based on juice content, the Supreme Court’s opinion reversed both the trial court as well as the Ninth Circuit Court of Appeals.  So, you might ask: “how did both of these courts get it so wrong and so contrary to common sense?”

Strangely enough, it was not as simple as it might seem to arrive at the “common sense” result.  To get there, the Supreme Court had to careful parse a federal regulatory scheme. The plaintiff (POM Wonderful) and the defendant (Coca-Cola) pitted two federal statutes against each other to support their respective positions in the lawsuit.  The Court determined that the allegedly “conflicting statutes” are in fact complementary and the regulatory scheme was designed to meet Congressional intent to protect consumers from deceptive labeling, and to permit a competitor to file suit.

Briefly, POM Wonderful sells pomegranate juice, and juice mixtures that include pomegranate juice.  Minute Maid (a Coca-Cola brand) entered the market and sold a juice in a package labeled “Pomegranate Blueberry” in all capital letters, on two separate lines.  In smaller type below, was the phrase “flavored blend of 5 juices.”  And below that, in still smaller type, the words: “from concentrate with added ingredients.”  Following a line break, the final phrase was “and other natural flavors.”  The label also displayed a picture of “a vignette of blueberries, grapes and raspberries in front of a halved pomegranate and a halved apple.”  The contents included a juice blend of 99.4% apple and grape juices, 0.3% pomegranate juice, 0.2% blueberry juice and 0.1% raspberry juice.

As you might expect, there is a federal statute that prohibits deceptive and misleading advertising.  POM filed suit against Coca-Cola alleging that the packaging deceives consumers into believing that the juice was predominantly pomegranate and blueberry juices, while it was in fact for the most part much cheaper apple and grape juice.  POM contended that the consumer confusion from this deception caused it to lose sales to Coca-Cola.  POM sought damages and an injunction, pursuant to 15 USC § 1127, otherwise known as section 45 of the Lanham Act, which allows an injured competitor (not the consumer) to file suit, and which provides in part:

“The intent of this chapter is to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce; to protect registered marks used in such commerce from interstate interference by State, or territorial legislation; to protect persons engaged in such commerce against unfair competition; to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits or colorable imitations of registered marks; and to provide rights and remedies stipulated by treaties and conventions respecting trademarks, trade names; and unfair competition entered into between the United states and foreign nations.”

Coca-Cola, on the other hand, defended that it was in compliance with the Federal Food, Drug, and Cosmetics Act (FDCA) labeling requirements and was therefore not subject to suit under the Lanham Act.  Unlike the Lanham Act, which allows an injured competitor to file suit, the FDCA is only enforceable by the government (FDA), not the consumer or a competitor, if the labeling requirements are not followed.  Coca-Cola reasoned that the FDCA being enacted after the Lanham Act had “pre-empted” the Lanham Act as to labeling of beverages, so that POM as a competitor had no cause of action.  And, since it met the FDCA requirements, Coca-Cola argued, it was liable to no one.  Both the trial court and the Ninth Circuit Court of Appeals agreed with Coca-Cola.  However, the Supreme Court found otherwise.

Firstly, the Supreme Court did not agree that the FDCA pre-empted the Lanham Act as to its reach over deceptive or misleading labeling of foods, drugs and cosmetics, which is covered by the FDCA.  Pre-emption, the Court explained, relates to federal statutes that pre-empt state law by superseding any state law relating to the same issues.  Instead, the Court regarded the intersection of the two federal statutes at issue as creating a “preclusion” issue:  does the FDCA preclude competitor causes of action under the Lanham Act in the area of food, drug and cosmetics labeling?

To answer this question, the Court looked at the overall regulatory scheme that Congress had designed under these two statutes.  On the one hand, the Lanham Act broadly subjects to liability “any person who misrepresents the nature, characteristics, qualities or geographic origin” of goods and services.  On the other hand Coca-Cola argued that the FDCA imposed national labeling standards, with which it complied.  But, the Court pointed out that the FDA does not review and pre-approve the labels of beverages.  Instead, the FDA relies on government enforcement actions.  Accordingly, the view that compliance with the FDCA standards set a ceiling for regulation was rejected.  Moreover, the Court found that while the FDCA pre-empts State laws relating to labeling of food, drugs and cosmetics, it also found that there was no support in the text of the statute for the notion that the FDCA precluded other federal laws that might bear on food, drug and cosmetics labeling.  In the Court’s view, the two statutes complement each other and it would show “disregard for the congressional design to hold that Congress nonetheless intended one federal statute to preclude the operation of the other.”  The Court also noted that it was “unlikely that Congress intended the FDCA’s protection of consumers through labeling should result in less policing of misleading food and beverage labels than in the competitive markets for other products.”  As a result, the Court concluded that the FDCA does not preclude POM’s suit against Coca-Cola under the Lanham Act.

So, in answer to our question in the very first paragraph: both lower courts got it wrong, not because of the facts, but because they did not appreciate the extent of the reach of the Lanham Act and did not appreciate the congressional design to protect both consumers and competing entities from unfair and deceptive practices in the marketplace.  A reviewer of the Supreme Court’s opinion will find that the Court takes an expansive view of the reach of the Lanham Act, and that should be comforting to those who may own trademark rights and who may be faced with competitors that engage in trademark infringement, unfair competition and deceptive trade practices.