FritoLay v Ralcorp Holdings et al The Case of the Copy Cat Chip

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RESEARCH PAPER OUTLINE Frito-Lay v. Ralcorp Holdings, et al: The Case of the Copy Cat Chip I. Introduction Lawsuits claiming copyright, patent, andtrademark infringement are a major barrier to entry in the snack food industry. In fact, most recently Frito-Lay, a PepsiCo company and one of the leading and most influential players in the snack food industry, sued its competitor Ralcorp Holdings and its subsidiary Medallion Foods. In its lawsuit, Frito-Lay alleges that Ralcorps bowl shaped corn chips has infringed on the design, patents, and trademarks of the Frito – Lay Tostitos SCOOPS! brand. Frito Lay has accused Ralcorp of “selling a copycat line of tortilla chips” (St. Louis Business Journal, 2012). Ralcorp later counter sued, denying all allegations of trademark infringement and claiming that Frito-Lay’s trademarks are invalid. This paper will present an analytical review of Frito-Lay and Ralcorp’s claims, from the perspective of both parties, in order to determine whether Frito-Lay’s claim that Ralcorp is selling a “copycat line of tortilla chips” (St. Louis Business Journal) has merit or are unfounded.
II. Issues Presented
A. Whether Ralcorp and Medallion Foods can be held liable for design and trademark infringement.
B. If Ralcorp is found liable, should Frito-Lay be awarded damages and a temporary injunction against Ralcorp?
C. What impact will a ruling for either party have on competition and innovation within the snack food industry?
III. Causes of Action: explanations, definitions, and legal elements of each
A. Design Infringement
1. legal definition
2. legal elements
3. facts of the case that apply to the cause of action
B. Trademark Infringement
1. legal definition
2. legal elements
3. facts of the case that apply to the cause of action
C. Patent Infringement
1. Legal definition
2. Legal elements
3. Facts of the case that apply to the cause of action
IV. Analysis
A. Facts of the Case
1. Frito Lay, subsidiary of PepsiCo patented the Tostitos as early as 2001.
Frito-Lay filed suit against Ralcorp Holdings, Inc. and Medallion Foods, Inc. for their production and sale of the of a bowl-shaped tortilla chip and accompanying packaging, which they feel is an intentional effort to imitate the famous and successful mark and packaging of Frito-Lay’s TOSTITOS SCOOPS! Tortilla chips.
2. Frito-Lay has sent a written request to the Ralcorp and Medallion. however, they have not stopped manufacturing or sales of the Bowlz brand bowl-shaped tortilla chip.
3. Frito-Lay believes Ralcorp and Medallion are infringing on their intellectual properties and are intentionally confusing and deceiving Frito-Lays customers. Frito-Lay is seeking intervention by the court to stop Medallion and Ralcorp from continuing their “knock-off” strategy
B. Frito-Lays grounds to sue for trademark/patent infringement
1. The trademark infringement, trade dress infringement, unfair competition and dilution actions taken by the defendants have interfered with the economic opportunities afforded to Frito Lay by use of the registered patents for TOSTITOS SCOOPS! Tortilla chip.
2. The product has been patented since 2001 and is a well-known Frito Lay product substantiated with a large monetary investment.
3. Frito-Lay owns patents for a number of systems and processes and used to manufacture its unique bowl-shaped tortilla chip design.
C. Analysis of claims as they pertain to SCOOPS! and BOWLZ
1. Trademark infringement
2. Trade dress infringement
3. Trademark dilution
4. Patent infringement (various)
5. Unjust enrichment
D. Defenses available to Ralcorp
1. Non infringement of the patent and trademark
2. Invalidity of the patent and trademark
3. Misuse of the patent
4. Innocent infringement
5. First Sale Doctrine
3. Remedies
a. Monetary Damages
1. Loss of profits
2. Ralcorp’s profits due to its infringement
3. Reasonable royalty paid by Ralcorp to PepsiCo
b. Injunctive Relief
V. Industry Impact
A. Negative or Positive effect the Court’s ruling will have on the snack food industry
1. Negative effect on Ralcorp and PepsiCo stock
2. Loss of profit, trust and business is possible
3. Increased regulation
4. Owners of trademarks, the likes of Princeton Vanguard, risk spending more revenue and their resources in either trying to register their trademarks, or trying to defend them. To date, Princeton has spent over $ 1 million in legal fees. In addition, the company will have to prove that the term “pretzel crisp” has a secondary meaning to the consumers, other than simply making consumes think that they are just thin pretzels that are crispy.
5. Big companies are likely to make similar lawsuits in an attempt to gain unfair advantage against their competitors. If the find that they cannot win in the marketplace, they will attempt to soften their competitors up, distracting them with large legal fees. Even in the eventuality that they lose the case, it will be a satisfaction victory for them since the smaller company will have wasted a lot of resources (Blair &amp.Cotter 2005).
6. Consumers of crisps are likely to confuse between the two products. Ralcorp definitely have a point in their attacks against the design mark of Frito-lay, especially in their ‘functional’ claim. Should Frito-Lay obtain proof that consumers are actually confused,
then they are likely to win the case.
7. Consumers are likely to attempt to hold the fast food industry responsible for manipulation of the food choices of Americans wrongfully. Some royal customers might disapprove any efforts whose aims have the effect of raising prices, reducing choices or altering the flavor or taste of their favorite snacks (Dannay 2002).
8. While fast food companies try to make profits off the demand for snack food that are much healthier, they will try to put some efforts in coming up with new products that will assist them in avoiding increased regulations and threats of lawsuits.
9. The case is likely to attract the attention of health campaigners as well as nutritionists. For a long time, snack foods have always been on the receiving end for their apparent role in increasing the cases of obesity. Companies manufacturing fast foods are always under pressure to modify the ingredients of their products to exclude less fat, and any other inputs that may lead to health problems. Since this case appears to attract a lot of publicity, these campaigners may take advantage of this attention to try to enforce their ideas. Therefore, the crisps under dispute between the two companies in this case may be under great scrutiny in order to find out their contents, together with the other products manufactured by both Frito-Lay and Ralcorp. The products of other fast food companies that are not involved in the case too may come under scrutiny (Bagley &amp. Savage 2010).
VI. Conclusion
The search for the best crisp has led to a pair of lawsuits between two of the biggest companies in the snack food industry. Frito-Lay, owned by PepsiCo, has filed a lawsuit against Ralcorp Holdings together with Medallion Foods, its subsidiary based in Arkansas, over the branding and design of Medallion’s corn chips. This lawsuit is an illustration of the battle between national brands and store brands selling similar products for cheaper prices, an industry in which Ralcorp is one of the biggest companies. All in all, this case will be quite interesting to follow, since it is an epitome of the battle between established national brands versus private label brands that have been on the increase since the economic downtown of 2008.
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