This is getting more confusing. Back to my other example of Unknown Shirt Maker and MegaCorp NameBrand.
Are you trying to tell me that Unknown Shirt Maker who actually makes the shirts and sells them to MegaCorp unlabelled is entitled to more than just the agreed price per unit because MegaCorp is going to make money by reselling the shirts with their “designer” label?
If you say no - then I see that the same as GP and RAG except the brand familiarity is reversed, but RAG is aiming to change that.
But this isn’t quite the same as the OP. Clearly there would be confusion caused by two items seemingly from the same manufacturer that were “different”. I could see maybe a different decision if Edan repackaged the American Heinz in a distinctive package and called it something other than Heinz Ketchup.
No, because they agreed when signing the contract that the shirts would be resold.
If RAG is buying GP at retail then they haven’t negotiated with GP all the ramifications of reselling. Buying something at retail doesn’t give you the right to market and resell, those rights are different and entail all sorts of different issues. If RAG wants to build brand familiarity on the back of GP they must purchase those rights. MegaCorp did that with USM as part of their contract. RAG can attempt the same thing, but they must negotiate those rights.
Indeed, they might. During the many times that the Chex cereal brand was sold from one company to another, the seller (Ralston) stipulated that the new owner (Ralcorp) could make generic knockoffs of Corn Chex and Rice Chex for use as store brands, etc., but NOT Wheat Chex. Both sides believed that the Wheat Chex brand was much more valuable than either the corn or rice versions.
Similarly, soft drink bottling companies all have the ability to make and bottle virtually any soft drink, but you’ll never see Coke or Pepsi letting their bottlers run off a few million cases of their particular cola formulas for use as a generic or private brand.
I think that “added value” must be a valid defense. Otherwise every single maker of food products would have to grow all of their own ingredients. What’s the problem with making some new mustard, with an additional ingredient thrown in? No one is claiming that Coca Cola is somehow reverse passing off Acme brand high fructose corn syrup as their own. Sure, it’s possible that they specifically contracted with them, but why is it necessary? Surely there must be HFCS manufacturers who sell their product under normal “I don’t care what you do with it after you buy it” circumstances.
Really I don’t see what the issue is at all, or the point of the tort (unless they don’t repackage, and there is some trademark on the packaging - but I see copy cat packaging all the time so why would that be an issue either?). If this new mustard brand is able to somehow pay for all the Grey Poupon, and still manage to get people to buy it at the higher prices needed to still make a profit, where is the harm? Grey Poupon is still making a hefty profit on all of the GP that the new mustard place is buying.
The only conceivable harm is if somehow people like the product because it is high quality, and then they stop repackaging GP and start selling their own crappier blend of mustard, cashing in on the previous standards people are used to. But so what? GP could do this too, trying to trick their customers into thinking they were buying the normal stuff when actually they had started using cheaper ingredients to increase profit. Either the customers don’t notice in which case, congratulations bottom line, or they start losing all their customers. The new mustard place would likewise lose all their customers when they changed their formula, in which case GP would get back their customer base, or else the customers don’t care, in which case GP wasn’t really losing out on anything. In fact, isn’t this pretty much exactly what happened when various sweetened products started converting over to HFCS from real sugar - they just hoped no one would notice, and hoped to cash in on their own built up reputation?
This tort ultimately depends too heavily on the law for something that is much more easily addressed simply by publicity. You can’t file the tort successfully without strong evidence. If you have that evidence, you can simply report it. Once customers are aware that brand X is really just brand Y with a new label, if they still buy it, then brand Y must really have perceived added value.
A) NSW Co is a fab house, but the designs for the shirts are from MegaCorp. NSW Co is contracted labor to build MegaCorp’s product. How is that different than any manufacturing situation? NSW is a sub contract to MegaCorp for labor.
B) NSW owns the designs, and fabs the shirts. Then they sell their shirts as a completed product to MegaCorp. In this case, NSW is a small shop with little market access, and they are allowing MegaCorp to distribute their product under its own name to provide market access. MegaCorp can sell shirts worldwide and get lots of business, far more market access than NSW has.
Either case one of the key components is mutual consent.
Now look at your mustard case. Grey Poupon is not a fab house, they are not building product for RAG mustard. They are creating and marketing a product. RAG is just stealing Grey Poupon’s design and product quality and building their own market name on Grey Poupon’s hard work.
Also, Grey Poupon does not need RAG to provide them market access. They already have a far larger market access than RAG. They have no need to agree for RAG to sell their product for them. Grey Poupon has no incentive to letting RAG market their product under a different name and charge more. If the market can bear more cost for the same quality of product, then GP would wish to sell their product at that cost. GP gets nothing out of RAG rebranding their product, and loses market recognition. There will be people who try RAG for whatever reason and think it is special, instead of buying GP direct. Then they tell their friends and families about RAG and how wonderful it is, and some of them switch brands. And GP’s reputation goes down.
It’s about brand recognition and brand protection. RAG builds a brand recognition and reputation on the back of GP, and RAG’s increase reputation is a detraction from GP’s reputation.
BwanaBob said:
I say no, and the difference is that USM is either working as a subcontract manufacturer for MegaCorp, or else is allowing MegaCorp to rebrand its product for the value gained by market access. In the mustard case, RAG is not providing value to GP, but rather taking value from GP, and GP is not being compensated for that value.
anson2995 said:
Direct sales may be equivalent, but perceived market share goes down and reputation is affected. GP’s brand is hurt.
jackdavinci said:
Coca Cola is not marketing high fructose corn syrup, it is marketing a beverage that contains that as one ingredient. HFCS manufacturers are not typically marketing a retail product to consumers, they are marketing an ingredient to food processing companies. Different markets, different customers, no confusion. And thus it is understood part of the contract that Coca Cola will be processing the HFCS and reselling a product that uses it.
Different entirely from RAG taking GP’s retail product, relabeling it, and then selling it as competitive product to GP. Isamu said:
Good summary up until the part at the end.
That’s not how I read the case description given. Bretford created the design, but holds no patent or trademark on the leg design. Smith copied the design. All of that was legal. Bretford was unhappy that Smith was copying their successful design, but had no design recourse, so tried to argue on rebranding/reverse passing off grounds that the leg design was “trade dress”, i.e. part of the unique appearance of their product that sets their product apart, like Coca Cola’s bottle designs. The courts effectively ruled that the leg design was not trade dress. There is no patent or trademark on that design, so Smith is fully justified in duplicating the design.
The only possible infringement was Smith using Bretford’s parts, but that was only for a demo unit, and all actual delivery parts were fabbed independently. There was no reverse passing off because Smith did not use any of Bretford’s parts.
There may still be justification for using parts of someone’s product as part of your own larger assembly, but this case does not appear to my non-legal mind to have any bearing on that situation.