Thursday, October 4, 2012
Wrigley Field: N.D. IL Finds Rule 408 Covers Settlement Evidence Used To Prove Lack of Irreparable Injury For Preliminary Injunction
Swerve IP holds a word mark (SWERVE), the name of its "all-natural" erythirtol-based non-sugar sweetener. It has used the mark since 2001. The United States Patent and Trademark office (the "USPTO") registered it in September 2009....That registration covers "natural sweetener" in International Class 030 (which includes a large number of food and candy products).
Swerve sweetener is sold (in one-pound bags and in single-use packets) through online retailers such as Amazon.com and certain physical stores like Whole Foods. Similar sweeteners are evidently sold in convenience stores, and Swerve IP hopes to expand to those stores in the near future. The sweetener is also used in the commercial manufacture of some food products, including diet pralines, but Swerve IP hopes to expand into more mainstream markets, including chewing gum. The sweetener is promoted via social media sites such as Facebook and Twitter.
Wrigley manufactures and sells the popular "5" brand of chewing gum. There are a dozen different flavors, one of which is called "Swerve"—because, Wrigley claims, it changes from a "tangy" to a "sweet tropical" flavor when chewed. The gum is not "all-natural" but is sugar-free, and is marked as containing natural and artificial flavors. Wrigley markets 5 Gum as an extreme sensory experience, targeting customers in their teens and 20s. 5 Gum is sold mainly in grocery and convenience stores, though it is also available through Amazon.com. Wm. Wrigley Jr. Co. v. Swerve IP, LLC, 2012 WL 4499063 (N.D.Ill. 2012).
Wrigley launched the Swerve flavor of 5 Gum. The flavor is featured on its website and social media outlets, and was advertised individually (but is no longer). In late 2011, Swerve IP sent Wrigley a cease-and-desist demand regarding the Swerve mark. Evidently after settlement discussions arising out of the TTAB proceeding failed, Wrigley filed a declaratory judgment action before th[e Northern District of Illinois] regarding its use of the Swerve term. Swerve IP [then] moved for a preliminary injunction.
In determining whether to grant the preliminary injunction, the court had to consider whether Swerve had no adequate remedy at law and would suffer irreparable harm if an injunction were not granted. On this point, Wrigley contended that "by its ever-increasing settlement demands, Swerve IP admits that any harm to it is compensable." The question for the court was thus whether evidence of these settlement demands was admissible under Federal Rule of Evidence 408, which states:
(1) furnishing, promising, or offering — or accepting, promising to accept, or offering to accept — a valuable consideration in compromising or attempting to compromise the claim; and
(2) conduct or a statement made during compromise negotiations about the claim — except when offered in a criminal case and when the negotiations related to a claim by a public office in the exercise of its regulatory, investigative, or enforcement authority.
Wrigley claimed that Rule 408 was not triggered because it was using "the settlement evidence to prove Swerve IP's financial motive for this injunction, not to prove that confusion is unlikely." In other words, Wrigley claimed that it wasn't using the settlement evidence to disprove the validity of the Swerve's claim. The Northern District of Illinois, however, found
the evidence barred by FED.R.EVID. 408, which excludes evidence of settlement negotiations offered "to prove or disprove the validity or amount of a disputed claim" or to impeach a witness. Although this situation is an awkward fit with the Rule's language, the Rule is to be interpreted to further its purpose of encouraging settlement.