Captain Morgan rum sales to spice up following the company’s successful defense of its design trademarks and distinguishing guise against Admiral Nelson’s spiced rum, barring sales of any bottled products with the patent-infringing Admiral Nelson character. (See: Diageo Canada Inc. v. Heaven Hill Distilleries, Inc.)
The trademark infringement decision dated June 12 was initiated in 2014 by Diageo Canada Inc., a division of London-based liquor giant Diageo PLC, against Bardstown, Ky.-based Heaven Hill Distilleries Inc. – a family-owned company.
Diageo initiated the trademark infringement action after it learned about the sales of Admiral Nelson’s rum products in Canada. In March 2014 Diageo sent a demand letter to Heaven Hill, putting it on notice alleging infringement of Diageo’s trademark rights. In connection with the alleged infringement, Diageo then issued a press release which stated, “Heaven Hill’s use of blatantly confusing trade dress, including blatantly confusing historical character, in connection with the sales of the Admiral Nelson rum brand is clearly intended to mimic the Captain Morgan brand to trade upon the brand’s goodwill and create consumer confusion.”
As exemplified below, Heaven Hill’s Admiral Nelson rum bottles are the five bottles on the left, while Diageo’s Captain Moran rum bottles are the five bottles on the right.
Diageo has spent roughly $150-million on marketing Captain Morgan in the past 15 years, and about $17-million per year. It sold the equivalent of more than 12 million 750-millilitre bottles in Canada in 2015, amounting to roughly $320-million in sales. The numbers represent about a 32-per-cent share of the rum market in Canada.
In contrast, annual retail sales of Admiral Nelson’s rum products in Canada approximated 890 nine-litre cases in 2014 and 657 nine-litre cases in 2015 up to May 2015. Admiral Nelson’s sales amounted to fewer than 11,000 bottles in Canada in 2014. Admiral Nelson’s sales occurred in Alberta, New Brunswick and Nova Scotia.
Diageo asserted that there was passing off of their unregistered “get-up” or trade dress; whereby “get-up” refers to the whole visible external appearance of the product in the form in which they are likely to be seen by the public before purchase. Diageo also asserted that Heaven Hill infringed ten of its design trademark registrations. Further, Diageo alleged that Heaven Hill’s use of its character or label trademarks was likely to depreciate the value of the goodwill associated with Diageo’s registered trademarks.
Among others, Diageo was seeking damages and injunctive relief as a result of the infringing activities of Heaven Hill.
It is clear that Diageo viewed the intrusion of the Admiral Nelson brand into the Canadian market as disruptive to the value of their brand. As part as their defense of abuse of process, Heaven Hill pointed to an email exchange of a brand manager at Diageo who stated:
“I’ve spoken with our IP team… Apparently, Admiral Nelson has been in the US for some time and has created problems for Captain Morgan. The team in the US didn’t react… The IP team doesn’t want to see this repeated in Canada…”
With respect to Diageo’s assertion of passing off, Diageo had to prove (1) the existence of goodwill associated with the Captain Morgan rum products; (2) deception of the public due to a misrepresentation creating confusion in the public; and (3) actual or potential damage. For (1), the Court determined that there was considerable goodwill associated with the Captain Morgan brand and its associated trade dress. For (2), using survey evidence, the Court determined that Heaven Hill directed public attention to its Admiral Nelson’s rum products in Canada in such a way as to cause or be likely to cause confusion between its rum products and Captain Morgan. For (3), due to the finding of confusion, the Court determined that there is a likelihood of potential damage being suffered by Diageo as a result of the Admiral Nelson’s rum products being offered for sale in Canada.
With respect to Diageo’s assertion of registered trademark infringement, Diageo had to prove that Heaven Hill’s product would cause confusion with their registered trademarks. Confusion occurs if the use of both marks in the same area would be likely to lead to the inference that the goods or services associated with those marks are manufactured, sold, leased, hired or performed by the same person, whether or not the goods or services are of the same general class. The applicable test is that of the somewhat hurried consumer with imperfect recollection of a plaintiff’s mark who is ordinarily cautious but does not pause to examine closely the similarities or differences between the two trademarks. In its examination of various factors, the Court determined that the degree of resemblance between Heaven Hill’s mark and Diageo’s trademarks is significant and there is a likelihood of confusion between the characters depicted on the bottle labels for the ADMIRAL NELSON’S rum products and all but one of Diageo’s registered trademarks.
With respect to Diageo’s assertion of depreciation of goodwill, Diageo had to prove that: (1) Diageo’s registered trademarks were used by Heaven Hill in connection with the associated wares or services; (2) Diageo’s registered trademarks are sufficiently well known to have significant goodwill attached to them; (3) Diageo’s trademarks were used in a manner likely to have an effect on the associated goodwill; and and (4) the likely effect would be to depreciate the value of such goodwill. The Court determined that, while Heaven Hill has not actually used any of Diageo’s trademarks, use of its Admiral Nelson’s mark is likely to have the effect of depreciating the value of the goodwill attaching to Diageo’s trademarks. The Court stated that Heaven Hill’s mark directly competes with nine of Diageo’s trademarks in the market for rum products in three Canadian provinces, where Diageo’s trademarks are sufficiently well known to have significant goodwill. Accordingly, Heaven Hill is likely to have an effect upon and depreciate that goodwill.
Diageo was granted a permanent injunction restraining and prohibiting Heaven Hill from the sale of their Admiral Nelson product, delivery of bottles using the Admiral Nelson mark to Diageo for destruction, an accounting of damages, and pre-judgment and post-judgment interest.
The Court appeared to give latitude to the unique sea-captain design of Diageo, due to the significant goodwill built up with such design. Even if there were some notable differences in a side-by-side comparison, the Court determined that there would nonetheless be a likelihood of confusion. Accordingly, the Court appropriately used its decision to protect the considerable efforts and money Diageo expended building its Captain Morgan brand, and to protect the public from undue confusion when purchasing rum products.