Thursday,March 30, 2006
Page11
REMINISCING(Column)
1938: Pepsi-Cola Gets on the Offensive, Sues Coca-Cola
ByROGER M. GRACE
Throughthe early part of the 20th Century, the Coca-Cola Company sued a multitude ofsoft drink makers that put out competing colas. Among them was the fledglingPepsi-Cola Company, a successor to two companies that had produced Pepsi andwound up in bankruptcy. In 1938, that new company showed remarkable spunk bytaking aim with its slingshot and becoming a plaintiff in an action against thegiant among the cola-makers.
Hearst’sInternational News Service on Aug. 6 disseminated this report, datelined New York:
“Complainingthat the Coca-Cola Company seeks to ‘destroy its business,’ the Pepsi-ColaCompany today had on file here suit asking an order restraining the former frominterfering with Pepsi-Cola, its subsidiaries and licensees throughout theUnited States.
“Apetition also has been filed in the U.S. Patent Office in Washingtonattacking the validity of the Coca-Cola trade mark, the Pepsi-Cola Companystated.
“Allegingthe names ‘Coca’ and ‘Cola’ both are descriptive, the petition claims they arepublic property and therefore cannot be used exclusively by one concern.”
Theattack in the Patent Office got nowhere—predictably. The U.S. Supreme Court hadalready ruled that “Coca-Cola” was not descriptive, but had gained a secondarymeaning.
Akey allegation in the complaint in the New York action was that Coca-Cola was harmingthe plaintiff by spreading the allegation that it was unlawfully marketing abeverage with the word “cola” in its name.
Well,that was true, the Coca-Cola Company asserted, cross-complaining to restrainthe Pepsi-Cola Company from using “cola” in its brand name, asserting that thisinfringed on the Coca-Cola trademark.
During that time period, theCoca-Coca Company, in various forums, in actions against a number of rivals,was pressing its contention that it, alone, could use the word “cola” in thename of a soft drink. Ultimately, it lost, as discussed in previous columns.The Fourth U.S. Circuit Court of Appeals in 1941, the Supreme Court of Delawarein 1944, and other courts in other years, rebuffed its theory, finding that theterm “cola” was generic and, when not joined with “coca,” was unprotected.
Butin 1938, when Pepsi’s suit was filed in Kings County, New York, it was anyone’s guess what the finaloutcome would be. At that point, the marketing of anything called “Pepsi-Cola”was forbidden in Canada,under a ruling the previous July by the Exchequer Court.
(Thatwas a ruling the Supreme Court of Canada was soon to reverse; the Coca-ColaCompany would appeal to the British Privvy Council, and would lose there,also.)
On June 20, 1939, the judgepresiding over the New Yorkaction made various pre-trial rulings, including disallowing a Pepsi-Coladefense to the counterclaim for trademark infringement. Pepsi responded to thecounterclaim by reiterating the gist of a contention in its complaint: that “byreason of its size, position in the cola beverage industry, methods, practicesand acts,” Coca-Cola was engaged in a monopoly in violation of the ShermanAnti-Trust Act and state statutes.
KingsCounty Supreme Court Justice Algernon Nova said, ineffect, “Huh?” He wrote:
“Evenif true, however, such fact may not be invoked as the basis upon which topredicate a defense to an action for the violation of a trade mark or foralleged infringement.”
Pepsi-Cola’s assertion in an actionin state court in New York alleging that Coca-Cola was engaged in a monopolyfizzled then—just as its action in federal court in New York alleging thatCoca-Cola was engaged in a monopoly fizzled in 2000. In the latter action,District Judge Loretta A. Preska of the Southern District of New York grantedsummary judgment to the Coca-Cola Company, finding that the plaintiff had notadduced evidence of a monopoly.
Themanufacturer of Pepsi-Cola—known as PepsiCo, Inc. since its June 8, 1965 mergerwith Frito-Lay—complained of the Coca-Cola Company enforcing “loyalty”provisions in contracts with independent food service distributors. If theywanted to deliver Coca-Cola fountain syrup to theater chains, restaurantchains, and other customers, they were foreclosed from also selling thecustomers any products made by PepsiCo.
Preskafound “[m]ost compelling” the fact that “no customer testified that Coca-Cola’sloyalty policy prevented the customer from obtaining Pepsi.”
TheSecond U.S. Circuit Court of Appeals on Dec. 24, 2002 affirmed Preska’s decision.
Copyright 2006, Metropolitan News Company