Pepsi Unsuccessful In Attempt To Derail Powerade ION4 Launch*
In the latest battle between soft-drink giants Coke and Pepsi, Pepsi’s Stokely-Van Camp (“SVC”) division – the division behind GATORADE -- unsuccessfully sought to derail the launch of Coke’sreformulated POWERADE sports drink marketed under the name POWERADE ION4. In refusing topreliminarily enjoin Coke’s advertising and promotion of the new POWERADE ION4 product, JudgeKoeltl of the Southern District of New York ruled that SVC had established neither a likelihood of success on the merits of its claims, nor a probability that it would be irreparably harmed if Coke were not preliminarily enjoined pending the case’s ultimate resolution. Moreover, the court found that underthe unclean hands doctrine, SVC’s prior actions were sufficient to preclude its request for injunctive relief under the present circumstances.
SVC’s GATORADE and Coke’s POWERADE products are the leaders in the sports drink category; however, sales of GATORADE products comprise upwards of 75% of the market. In an effort to increase its market share, beginning in 2007 the Coca-Cola Company division responsible for POWERADE, Energy Brands, Inc., took steps to reformulate its product. The goal behind thereformulation was to develop a product that more precisely mimicked the fluids lost by athletes during exercise, i.e., sweat. To achieve this goal, Coke added the electrolytes calcium and magnesium to the POWERADE formula, a formula which already contained sodium and potassium. The quantities of these four electrolytes were adjusted so that the reformulated POWERADE product contained theelectrolytes in approximately the same ratio that such electrolytes are typically lost in sweat.
The marketing strategy developed by Coke for its re-launch of POWERADE included an advertising campaign with two phases – a first, “Seed” phase of short duration which was intended to be competitive in nature was designed to compare the reformulated product to the leader in the field, GATORADE; and a second, “Launch” phase which was designed to focus on the new product and to explain the science behind the product and the product’s benefits to consumers. The Seed phase employed billboards and widespread print advertising in sports-related magazines, and directly (and indirectly) compared the GATORADE and POWERADE ION4 products by featuring, for example, images of the GATORADE bottle (or portions thereof), together with statements focusing on the fact that GATORADE did not have the calcium and magnesium electrolytes found in the reformulated POWERADE ION4 product. The Seed portion of the campaign touted the POWERADE ION4 product as the “Complete” sports drink because of its electrolyte formulation, and encouraged consumers to “Upgrade Your Formula. Upgrade Your Game”. As anticipated, the comparative “Seed” ads ran for ashort period of time (less than 60 days).
Coke’s second-phase “Launch” ads focused less on comparing POWERADE ION4 to GATORADE and more on explaining to consumers the science behind reformulated POWERADE. The Launch ads did, however, continue to refer to the new product as the “Complete” sports drink and continued to analogize the formula to the composition of sweat.
Upset by the Coke POWERADE ION4 campaign, SVC filed suit against Coke in the Southern District of New York alleging false advertising, trademark dilution (by tarnishment), deceptive acts and practices,injury to business reputation and unfair competition under both federal and state law. SVC thereafter sought a preliminary injunction in connection with its false advertising and its dilution claims (it did not seek preliminary relief in connection with its remaining claims).
The court began its analysis by explaining that under Second Circuit law, in order to satisfy its burden of proof on its motion for a preliminary injunction SVC would need to show a likelihood of irreparable harm in the absence of the preliminary relief, and either a likelihood of success on the merits of its claims, or sufficiently serious questions going to the merits of its claims so as to make them a fair ground for litigation, with the balance of hardships tipping squarely in its favor.
With respect to the dilution by tarnishment claim -- a claim based on the use by Coke of images (or partial images) of the GATORADE bottle and the use of other GATORADE trademarks and logos -- the court quickly disposed of SVC’s request for preliminary injunctive relief. Because Coke had stopped making use of the GATORADE marks in its ads, there was no need for the requested relief.
Addressing the false advertising claims, the court pointed out that SVC objected to four specific elements of the POWERADE ION4 advertising: (i) the claim that POWERADE ION4 is “the complete sports drink”, thereby implying that GATORADE is an “incomplete” sports drink that is missing the key -- “critical” -- electrolytes calcium and magnesium; (ii) the claim that the POWERADE ION4 product replenishes the key electrolytes lost in sweat while others -- i.e., GATORADE -- do not; (iii) the allegation in the POWERADE ION4 ads that calcium and magnesium are “critical” electrolytes; and (iv) the use of the slogan “Upgrade Your Formula. Upgrade Your Game.”
*A version of this article has also appeared in World Trademark Report Daily.