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The city of Philadelphia evokes images of Independence Hall, the Liberty Bell, the Declaration of Independence and the constitutional conventions. Each of these great and meaningful historic places and events focused on words and their meaning. Since there continues to be a debate over the intent and meaning of those famous words, it seems appropriate that Philadelphia has been home to several lawsuits involving the increasingly lucrative market for artificial sweeteners.

Although we do not know if Gene E.K. Pratter and John R. Padova prefer any type of sweetener in their coffee or tea, their courtrooms were home to some battles in the billion-dollar artificial sweetener market including yellow, pink and blue packets as well as sugar, the natural sweetener. This litigation and the level at which it was conducted suggest that issues involving intellectual property rights are increasingly important aspects of the food technology industry.

The battle for market share is increasingly intense with significantly more investment in research and development, focus groups, product creativity and placement. Increasingly, companies are recognizing that those investments require greater planning with regard to each aspect of identifying, protecting and enforcing an IP portfolio and greater vigilance in the marketplace for competitive activity that infringes those IP rights.

With increased attention on natural sugar as an alleged culprit behind obesity, diabetes and a host of medical problems, more and more consumers are turning to artificial sweeteners as an alternative, despite the ongoing debate over their possible health risks. In less than a decade, Splenda sweetener established a 60 percent market share for an alternative to sugar. Since this entire market share was not comprised of new consumers, it is not surprising that competitors found their percentage of the market shrinking as Splenda sweetener grew in popularity. The companies with shrinking market shares turned from direct product qualities, such as taste, dissolvability and lack of after taste, to focus on the words used to promote the Splenda sweetener product.

The competitive issue thus turned on the product slogan and the use of the word “sugar” within the product slogan. While future marketing slogans are unlikely to tout “made from synthetic cholorocarbon,” the recent slew of litigation suggests the need for increased attention to emerging legal standards and care when positioning products in the marketplace.

Since Philadelphia has once again become the focal center over the meaning and intent of words, this is a good time to recap the word litigations that have attracted the eyes of lawyers, corporations and consumers alike as the battle rages for supremacy in the sweetness marketplace.

The monthlong case before Pratter in the U.S. District Court for the Eastern District of Pennsylvania concluded with a settlement between the parties — but whether it has been amicable, confidential or truly conclusive is another story.

Merisant, the maker of Equal, sued rival McNeil, a subsidiary of Johnson & Johnson and the maker of Splenda sweetener, seeking more then $200 million in damages. The suit focused on Splenda’s advertising slogan, “Made from sugar so it tastes like sugar.” The offending word in the slogan being “sugar,” and the debate was over what that word means scientifically and how consumers understand that word. Some may see this as semantics, but in the billion-dollar market for sweeteners, it was considered critical and had to be resolved.

Equal once was on top of the $1.5 billion artificial sweetener market, until being toppled by Splenda’s introduction in late 1999. Today, Splenda has overtaken the competitive Equal and Sweet ‘N Low with sales of approximately $410 million in 2006. More than 4,000 food and drink products, from breakfast cereals to diet drinks and ice cream contain Splenda. And the market appears to have substantial growth potential. This was not a purely academic exercise about words, and it had the potential to greatly influence future product introductions and advertising.

Merisant argued that McNeil engaged in unfair competition through false and misleading advertising, in violation of the federal law, known as the Lanham Act, and Pennsylvania common law because of its product slogan. According to Merisant, McNeil’s slogan is impliedly false and has the tendency to deceive customers into believing Splenda sweetener is a natural food product.

McNeil maintained that the statement is true, unambiguous and does not imply Splenda sweetener contains sugar or is natural. The sweetening ingredient in Splenda sweetener — sucralose — is made through a patented multistep process that begins with sugar. For the science-minded, three of eight hydroxyl groupings on the sucrose molecule are then replaced with three chlorine atoms naturally found in foods like salt and lettuce — and sugar. The resulting sucralose is 600 times as sweet as ordinary sugar, but has no calories, no carbohydrates and no sugar. Therefore, it was argued that the chemical process, not the original sugar, is responsible for Splenda’s sweetness — despite the fact that the main ingredient for the end product sold as Splenda sweetener is regular, homegrown sugar cane.

In order to substantiate the claim that McNeil’s advertising and its tendency to deceive a substantial portion of the relevant audience led to the product’s popularity — and not the product’s taste or quality — Merisant presented surveys to show that 28 percent of respondents believed that Splenda sweetener “contains real sugar” and 44 percent believed that Splenda sweetener is a natural product. In response, McNeil dismissed the survey conclusions as the result of the surveys using “highly leading closed-ended questions.”

The trial of this case ultimately came down to an “epic battle over proper diction and syntax,” with McNeil claiming that “made from sugar” excludes the interpretation that Splenda sweetener is sugar and Merisant claiming that the phrase led consumers to infer the naturalness of Splenda sweetener.

After more than a month of trial, the parties reached a settlement after the jury asked Pratter for a calculator and the expert reports from both sides on how to determine damages. The terms of the resulting settlement were sealed and the agreement was confidential. While the terms of the agreement have remained confidential, there has been some insight into the possible jury verdict with jurors revealing publicly that a verdict had been reached in Merisant’s favor, but not letting on to the amount sought, except to reveal it was not what was sought.

Weeks after the settlement was reached, Merisant and McNeil returned to court, with each party pointing fingers at the other regarding adherence to the agreement. Merisant accused McNeil of reneging by refusing to take certain actions by a June 10 deadline, and asked the court to order specific performance or enter the original jury verdict. McNeil pointed back at Merisant with the claim that it violated the confidentiality provisions of the settlement by placing advertisements, in publications such as USA Today, titled “Now Taste the Truth,” informing consumers of the litigation and the settlement, and adding information about a recent ruling in the French courts.

In a decision handed down at about the same time as the Philadelphia trial came to a close, the Commercial Court of Paris found that Splenda sweetener’s slogan “violates consumer protection laws in France.” The French court’s ruling has no standing in the U.S., and the award amounted to a mere $54,000 in damages to Merisant France.

McNeil argued that Merisant’s Web site had violated the secrecy provisions in the settlement and used “the parties’ amicable resolution to publicly humiliate McNeil or tarnish its reputation.”

Around the same time, just an elevator ride away in another federal courtroom at Sixth and Market streets, the Splenda product was involved in another consumer battle.

Even in a legal environment where consumer product companies and intellectual property law firms deal daily with issues concerning trade dress and consumer confusion, it is rare that a company challenges a generic store brand in court. Yet, that was what occurred in a case heard before Padova.

McNeil filed suit against Heartland, an Indiana-based manufacturer of private-label artificial tabletop sweetener products, claiming trade dress infringement and dilution. In addition to words, color-coding is an increasing issue in trade dress. While color-coding has developed in some industries as a way to quickly identify the active ingredient in artificial sweeteners — be it pink, blue, or yellow, there is always the public interest in preserving access to the limited supply of available colors.

Heartland provides store-brand sucralose based sweetener for five supermarket chains: Stop & Shop, Giant, Tops, Food Lion and Safeway. McNeil argued that the packaging for this generic product, which uses a mostly yellow background with blue italic lettering, is confusingly similar to Splenda sweetener’s packaging. This was especially troublesome because the Heartland packages are identical in size and display.

McNeil’s motion for a preliminary injunction against Heartland was denied. Applying the 10 Lapp factors, the standard applied in the controlling 3rd U.S. Circuit Court of Appeals law to determine the likelihood of consumer confusion, the court found insufficient evidence to establish actual consumer confusion. Further, the court found that manufacturers of generic products usually use similar reference points to compare with the national-brand, and that consumers are “highly aware of the existence of store-brand products.”

In addition to the aforementioned clashes with artificial-sweetener competitors, McNeil faces a showdown later this year with the Sugar Association — a trade and lobbying group for the $10 billion American natural sugar industry. The association has separately embarked on a multimillion-dollar competitive campaign that features such lobbying efforts as the www.truthaboutsplenda.com Web site, which purports to educate consumers about the chemical artificial sweetener Splenda and its “misleading advertising campaign.”

In an obviously necessary response to protect its market share, McNeil charged the sugar association with false advertising designed to mislead consumers about the safety and taste of Splenda sweetener in an effort to boost sugar sales. Alas, this trial will not play out in Philadelphia, but in the Central District Court of California. It is a bit of bittersweet irony that the Sugar Association has singled out and sued the artificial sweetener that is one of their biggest customers — despite arguments about the word, Splenda sweetener is made by a process that starts with natural sugar.

Splenda sweetener’s sucralose-related battles are not limited to federal district courts. An investigation is currently pending in the International Trade Commission (ITC) regarding the importation of sucralose sweeteners manufactured in China. Tate & Lyle, a UK-based company that owns the patent for the Splenda sweetener product, claims infringement of its patented manufacturing technology. Several of the Chinese manufacturing groups charged with infringement have issued statements opposing the allegations.

Unlike the federal courts that can award monetary damages, the ITC can only grant injunctive relief to block importation of the infringing product. Most ITC investigations are on expedited timelines that are generally shorter than district court actions and the exclusion order may be obtained more quickly. Exclusion orders are also a powerful remedial tool since obtaining personal jurisdiction over foreign companies responsible for the alleged infringing products manufactured overseas is often difficult or impossible.

Given the endless, debate over words, their meaning or their impression on the relevant consumers, you can expect similar legal battles in the years to come. It will also be interesting to observe the battle over the degrees of similarity needed for consumer confusion.

ANTHONY S. VOLPE , managing shareholder of Volpe & Koenig, has corporate and private practice experience in securing, licensing and enforcing all aspects of intellectual property rights. Volpe has experience in foreign intellectual property matters, including litigations, administrative proceedings, and licensing of territorial and global rights.

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