No goodwill ownership in snack shape kills passing off claim

The District Court of Tel Aviv has dismissed a claim for passing off brought by the US producer of a corn snack against the producers of similarly shaped products (General Mills Inc v Mishubach Food Industries Ltd, Case CC 814/97-815/97, December 18 2005).

General Mills Inc produces a crunchy corn snack that has the shape of a hollow cone. The snack is marketed throughout the world under General Mills' name and brands, in particular the brand Bugles. In Israel, however, the product is marketed by Osem under the trademark APROPOS. General Mills supplies Osem with the part-baked snack in bulk and Osem finishes the baking, and packs and distributes the snack in Israel. Osem owns the trademark APROPOS.

General Mills sued (in separate cases that were subsequently joined) two groups of defendants (Meshubach Food Industries Ltd and AM Haemek Snacks Ltd) who manufacture and sell a similar corn snack with a similar cone shape under the marks LE NASH and PEPITO respectively. The packages of all products show images of the cone shaped snacks, but are otherwise dissimilar.

The defendants claimed that the action should be dismissed in limine since, to the extent that goodwill should be attributed to the shape of the cone, such goodwill belongs to Osem and not to General Mills. Furthermore, the defendants claimed that (i) the shape of the snack was devoid of distinctiveness, and (ii) no confusion could occur in view of the difference in the packaging designs.

General Mills claimed that the goodwill in the snack shape arose out of the sale of more than 140 million packets of the APROPOS snack since 1986, worth tens of millions of shekels. General Mills claimed that APROPOS is one of the four most well-known snacks sold in Israel. It backed this claim with a survey of 411 relevant consumers. The survey showed that 83.7% of the interviewees identified the snack that was showed to them as APROPOS.

The court admitted the survey evidence even though the technology used to conduct the interviews did not allow the tracking of any original paper forms as the answers were entered directly into a computer. On the basis of the survey and other data submitted with regard to sales and investment in advertising, the court held that the shape of the APROPOS snack has become renowned among the public.

Nevertheless, the court found that the reputation of the snack belonged to the local distributor, Osem, and not to the supplier of the raw material, General Mills. The court noted that General Mills and Osem had signed a private label manufacturing agreement in 1992. According to the agreement, Osem was entitled to stop buying the raw material from General Mills and to purchase such material from other suppliers, while allowing Osem to carry on using the same packaging and the same trademark.

Since APROPOS was a private label, the court reasoned, the goodwill of the product belonged to the marketer and not to the manufacturer.

The court concluded that General Mills had failed to show that it was the owner of the goodwill in the APROPOS snack and, accordingly, it was not in a position to sue for passing off.

The court further noted in an obiter dictum that the question remained as to whether the three-dimensional shape of the product was entitled to perpetual protection according to the tort of passing off.

Notwithstanding the above findings, the court also noted that confusion could not occur since the defendants' trademarks and their packaging were different from those of General Mills. The court noted that General Mills had not submitted any actual proof of confusion, even though the defendants' products had been on the market for eight years. As to the claim of post-sale confusion, the court said that this theoretical possibility was not supported by any evidence. The court further held that the fact that the defendants could have marketed their products in any design whatsoever but chose specifically to market them in the shape of a hollow cone that characterized the APROPOS snack did not escape its notice. In this regard, the court cited the Supreme Court ruling in Vargus Ltd v Noga Engineering Ltd (Civil Appeal 5689/94 PD 52(1)521, 531), in which it was stated that an imitation, even deliberate, does not necessarily indicate an intent to mislead the public to believe that the defendant's product is the product of the plaintiff; it may be that the purpose of the imitation is to show that the imitating product has characteristics that are similar to the product that it imitates. In other words, the imitation may attract customers to purchase the product for its qualities and not necessarily because the consumer is deceived as to the source of the goods.

Accordingly, the court (i) dismissed General Mills' claims, and (ii) ordered it to pay IS120,000 ($25,000) before VAT in costs to each of the defendants.

David Gilat, Reinhold Cohn & Partners, Tel Aviv