On Wednesday, June 30th, the Court of Appeals for the Federal Circuit issued a decision in Royal Crown Company, Inc., et. al. v. The Coca-Cola Company which vacated and remanded an earlier decision by the Trademark Trial and Appeal Board (TTAB) regarding the use of “ZERO” trademarks on soft drink beverages marketed by Coca-Cola. The Federal Circuit panel, consisting of Circuit Judges Pauline Newman, Kathleen O’Malley and Richard Taranto, found that the TTAB had erred in its legal framing of the question regarding the claimed genericness of Coca-Cola’s mark and failed to determine whether the mark was at least highly descriptive if not generic.

This case stems back to a formal opposition filed at the TTAB by Royal Crown back in August of 2007 to challenge Coca-Cola’s trademark application for the registration of the standard character mark “COCA-COLA ZERO.” Royal Crown’s opposition notes that it was the first company to come out with a diet soft drink which was marketed in 1958 as Diet Rite. Beginning in 2003, Royal Crown began marketing a Diet Rite Pure Zero and, in 2005, it applied for a trademark application to protect the use of that mark on soft drinks and syrups used in the preparation of those drinks. Months later, the U.S. Patent and Trademark Office issued a non-final rejection requiring Royal Crown to disclaim the “ZERO” portion of the mark as it was merely descriptive of features of the soft drink, specifically that the drink has zero sugar, zero carbohydrates or zero calories.

Beginning in March 2005, Coca-Cola filed a total of 17 trademark applications with the USPTO which included the term “ZERO,” including marks such as “SPRITE ZERO,” “FANTA ZERO,” “POWERADE ZERO” and “COCA-COLA ZERO.” In response to each of these applications, the USPTO issued office actions asking Coca-Cola to disclaim the “ZERO” portion of these marks for reasons similar to those given to Royal Crown when it tried to trademark its “ZERO” mark. In response, Coca-Cola refused to disclaim “ZERO” from the marks, arguing that the term had acquired distinctiveness under 15 U.S.C. § 1052(f) as the term had become distinctive of the applicant’s goods in commerce. The USPTO accepted this argument and rescinded its requirement to drop the “ZERO” portion from the mark and approved the marks for publication.

In May 2016, the TTAB issued a board decision which sustained- and dismissed-in-part the opposition filed by Royal Crown and Dr Pepper/Seven Up, which like Royal Crown is a member of the Dr Pepper Snapple Group. While the opposers argued that the genus of the goods offered by Coca-Cola under the “ZERO” mark were zero-calorie soft drinks, the panel of administrative trademark judges (ATJs) in the case decided that the genus instead fell into the broader category of soft drinks, encompassing the more narrow category of soft drinks including no calories.

Applying the genericness standard set out in the Federal Circuit’s 2015 decision in Princeton Vanguard, LLC v. Frito-Lay of North America, the ATJ panel concluded that third-party uses of “ZERO” on record did not demonstrate that the term was generic; that third-party registrations of record, including those filed by Royal Crown where “ZERO” was disclaimed, led to the conclusion that “ZERO” was descriptive and not generic; that public references showed that ordinary consumers used the term “ZERO” to refer to the wider genus of soft drinks; and that, although “ZERO” conveys information about Coca-Cola’s products, it doesn’t name the genus of the goods as zero-calorie soft drinks. As for Coca-Cola’s claim that the “ZERO” mark had acquired distinctiveness because of secondary meaning, the TTAB panel found that the evidence submitted by all parties only addressed secondary meaning in the realm of soft drinks and while Coca-Cola met their burden of proving distinctiveness relating to sports drinks, it did not establish distinctiveness by preponderance of the evidence relating to energy drinks.

On appeal to the Federal Circuit, the appellate court noted that if Royal Crown did not demonstrate the genericness of Coca-Cola’s “ZERO” marks, Coca-Cola needed to demonstrate the acquired distinctiveness of those marks because of Coca-Cola’s early argument of acquired distinctiveness on Section 1052(f) grounds, citing to the Federal Circuit’s 2012 decision in Coach Services v. Triumph Learning. Royal Crown’s appeal to the Federal Circuit primarily challenged two grounds of the TTAB’s decision: that the TTAB erred in its application of the legal framework for determining genericness by disregarding indirect evidence offered by Royal Crown to demonstrate the genericness of “ZERO” across the genus of goods at issue; and that the TTAB erred in finding that Coca-Cola demonstrated acquired distinctiveness in the “ZERO” mark when the Board didn’t first characterize Coca-Cola’s marks as highly descriptive and failing to explain its rationale for the acquired distinctiveness finding.

In finding that the TTAB erred in the application of the genericness framework, the Federal Circuit panel held that the Board failed to consider that a term can be generic for a genus of goods if the relevant public understands the term to refer to a key aspect of that genus, a standard found in the Federal Circuit’s 2016 decision in In re: Cordua Restaurants. Under the Cordua standard, the public’s understanding of “ZERO” when used in combination with a beverage name to refer to a sub-group or type of beverage carrying specific characteristics was enough to render the term generic. On remand, the Federal Circuit instructs the TTAB to examine whether the term “ZERO” refers to a key aspect of the genus when attached to a beverage mark.

The Federal Circuit also found that the TTAB erred in assessing Coca-Cola’s burden of proving acquired distinctiveness “without first determining exactly what that burden was.” Citing multiple cases, the appellate court noted that it has long held that the burden of showing acquired distinctiveness increases with the level of descriptiveness, and that a more descriptive term requires more evidence of secondary meaning. One strong example for this argument was found in the Federal Circuit’s 2015 decision in In re: Louisiana Fish Fry Products, where the Federal Circuit held that the term “FISH FRY PRODUCTS” was highly descriptive and therefore did not acquire distinctiveness despite five years of substantially exclusive and continuous use of the term. On remand, if the TTAB reaches the question of acquired distinctiveness, the Federal Circuit directs the Board to both make an express finding regarding the degree of the mark’s descriptiveness on a scale of generic to merely descriptive, and then it must explain how its assessment of the evidentiary record reflects that finding.

In critiquing the TTAB’s treatment of the evidentiary record, the Federal Circuit noted that “[d]espite the Board’s intimations otherwise, Royal Crown was not required to provide direct evidence of consumer perception to support its genericness challenge to TCCC’s marks, whether from a survey, dictionary, or otherwise.” Royal Crown offered evidence on genericness which the TTAB generally found to be competent, but the Board relied on the dollar value of sales of Coca-Cola’s “ZERO” products to overcome Royal Crown’s genericness argument. The Federal Circuit found that such sales figures do not demonstrate that the term is not used by the public to refer to a genus of goods or a sub-group thereof. The Federal Circuit also took issue with survey evidence provided by Coca-Cola because the survey was conducted more than five years before the close of testimony before the TTAB and the questions used in the survey was not sufficient to demonstrate the public’s perception of the term “ZERO.” “The Board’s reliance on the survey evidence here at least seems inconsistent with any heightened level of inquiry, if the Board intended to apply one,” the Federal Circuit’s opinion reads.

The Dr Pepper Snapple Group, which represents the opposers to Coca-Cola in this trademark case, offered the following statement on the Federal Circuit’s decision:

“We are very pleased with the court decision. As we’ve stated from the outset, we do not believe that any company should have the ability to claim exclusive trademark rights to a term like ‘zero’ in connection with zero-calorie beverages.”

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