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U.S. – Reframing the Test for Genericness in the Soft Drink Wars

Royal Crown Co., Inc. v. The Coca-Cola Co., 2018 WL 3040163 (Fed. Cir. June 20, 2018)

In late June, the Federal Circuit issued  an opinion in the year-long litigation between Royal Crown Co., Inc. (“RC”) and The Coca-Cola Co. (“TCCC”) over the registrability and, correspondingly, the inherent protectibility of the term ZERO as applied to low calorie/low carbohydrate beverages. In its reversal, the Federal Circuit offered some useful clarification regarding the legal and evidentiary standards for evaluating genericness and the role of secondary meaning in such evaluations.

Factual Background

This case arose out of RC’s oppositions to a series of 17 trademark applications filed by TCCC to register ZERO-formative marks for soft drinks and sports drinks including, inter alia, SPRITE ZERO, COCA-COLA ZERO, FANTA ZERO, POWERADE ZERO, etc. At the time of TCCC’s filings, multiple companies were marketing their own ZERO-named beverages and had applied to register ZERO-formative marks for various types of soft drinks. Then and now, TCCC was a dominant player in the soft drink marketplace.

During examination of TCCC’s applications, the PTO requested a disclaimer of “zero” on the ground that ZERO was merely descriptive of a beverage with low calorie or carbohydrate content. TCCC declined the PTO’s disclaimer request, arguing successfully that the term had acquired distinctiveness under Section 2(f) as part of a family of ZERO marks. RC’s opposition followed.

In its oppositions, RC argued in the alternative that the term ZERO (1) was merely descriptive of attributes of the associated goods and could thus not indicate the source of TCCC’s goods or that (2) was generic when applied to certain beverage products and could thus never indicate the source of goods. When the Board dismissed RC’s oppositions, RC appealed to the CAFC.

The Federal Circuit’s Decision

The Federal Circuit vacated the TTAB’s decision and remanded on several grounds. In the face of TCCC’s own admission (via its 2(f) declaration) that ZERO was not inherently distinctive and was, therefore, descriptive, the Board failed to assess where the term fell on the spectrum of distinctiveness (i.e., highly descriptive, i.e., generic or merely descriptive) before evaluating TCCC’s secondary meaning evidence. This lapse was important for multiple reasons.  First, the burden for demonstrating secondary meaning increases according to the mark’s level of descriptiveness. Without first deciding on the relative burden, the Board could not properly find that TCCC had satisfied the same.  Second, where a mark is so highly descriptive as to be generic, it cannot be rescued by any amount of secondary meaning evidence, no matter how voluminous. Because by definition, generic terms cannot indicate source and, accordingly, cannot acquire distinctiveness.

The test for genericness is a two-step inquiry. First, a tribunal must identify the genus of goods or services at issue. Next is a determination of whether the relevant public understands the term to refer primarily to that genus of goods and services. Public perception is, thus, a primary consideration.  And, while the Board correctly addressed the first prong, the CAFC found it had erred in failing to consider whether the public understood ZERO as referring to a subgroup or key aspect of the category (i.e., soft drinks with low calorie or carbohydrate content) as contrasted with the category as a whole. Evidence of the former would be sufficient to support a finding of genericness. Thus, in requiring that RC demonstrate public use of the term, and that its perception referred to the category of beverages, the Board held RC improperly to too high a standard.

The Board also erred in its suggestion that RC was required to provide direct evidence of consumer perception to support its genericness challenge to TCCC’s marks, whether from a survey, dictionary, or otherwise. RC’s indirect evidence of competitor use of ZERO, competitor trademark applications and registrations, consumer use of ZERO, and TCCC’s own descriptive use of ZERO could be sufficient to satisfy its burden as a challenger.

Practical Implications

Although TCCC no longer uses the marks at issue in the proceeding, the decision still has important ramifications. First, it clarifies that a term can be generic where the relevant public understands the term to refer to a key segment or feature and not the whole of the genus. Second, the decision reiterates that generic terms cannot be rescued by proof of distinctiveness or secondary meaning, regardless of the weight or size of the evidentiary record. Third, a challenger can satisfy its burden of demonstrating genericness by a “preponderance of the evidence” through indirect, rather than only direct, evidence.