Judge, Skeptical of Pepsi’s Motives, Urges Label Change in Life Water Suit

The judge in Glaceau’s suit vs. PepsiCo’s Vitaminwater imitator Life Water warned the defendants to agree to redesign their label or risk her issuing temporary restraining order, according to beverage industry newsletter Beverage Business Insights.

During a preliminary hearing in a bottle-cluttered courtroom in US District Court for Southern District, Judge Shira Scheindlin suggested that, more than any legal arguments, simply studying various marketers’ reinforced-water packages during idle moments in another case had made it clear to her that overall look of SoBe Life Water is intended to create confusion vs Glaceau’s Vitaminwater, BBI reported.

The hearing featured a plaintiff’s table arrayed with widely varying beverage packages intended to demonstrate the range of approaches used in launching enhanced waters, while PepsiCo’s table was arrayed with numerous brands in the same straight-walled bottle as Vitaminwater, in an effort to show that most entrants employ a similar look.

Glaceau’s lead counsel, David Bernstein of Debevoise & Plimpton, while occasionally sipping from bottle of Fruitwater, led judge through evidence that included photos of shelf sets in Wegmans and Duane Reade retail stores in which Life Water was shelved within a Vitaminwater set or adjacent to it in manner that played up packages’ similarities, BBI said.

According to BBI, the hearing’s turning point came when Bernstein showed Judge Scheindlin the image of a label that PepsiCo had considered in early January, before choosing the eventual look of its release. The earlier pack did not use alternating white and colored band, used a uniform blue at the bottom of the label rather than matching color to the fluid color, as Vitaminwater does, and played up the SoBe name, which is nearly invisible in current Life Water pack.

Bernstein said that Pepsi switched to the more blatantly imitative pack only after Glaceau rebuffed takeover overtures from PepsiCo in Jan., according to BBI. Bernstein also presented a mockup that Glaceau had done of new Life Water label that eliminates 2-tone banding so that the package no longer is offensive to Glaceau. It allowed most other elements of the pack – including the clear bottle and cap – to remain the same.

According to BBI, the new label was a practical solution for the judge in a case that otherwise could run on for years.

“This is your best argument,” she said to Bernstein when he brought Glaceau’s mockup to bench. “Why don’t they settle the case and do this?”

Then she spoke directly to PepsiCo’s counsel: “Switch to that beautiful label – there’s no reason not to, except to confuse people. . I think this is the answer. I think this closes the case.”

PepsiCo’s lead counsel, Louis Solomon of Proskauer Rose, objected that it’s not in his authority to redesign packages for his client. “I can’t tell my client what to do,” he said. “Well, maybe I can,” the judge replied. She added: “He’s showing me this (Glaceau’s redesign), and the only reason for you to resist this is you want people to grab the wrong bottle . I don’t know why you’re resisting such an obvious solution.” Later, she added: “They’ve got 2 great options. They’re really imposing on the court” by not immediately taking 1 of them, BBI reported.

“You’ve done a good job,” she said to Bernstein. “If they were smart and compromise, I would let them sell their product on the shelf” instead of ordering a recall.

Scheindlin called a recess, according to BBI, but when a settlement couldn’t be reached, she criticized the defendants, saying “I gave you 2 choices . that’s what’s really starting to upset me.”

BBI reported that Scheindlin then attacked most of the arguments offered by Solomon on behalf of Life Water, including an attempt to show that Life Water did not have the “medicinal” look that had cost AriZona a similar case brought by Glaceau in 2002. Retorted Scheindlin, “You clearly designed it around that case.”

Solomon later offered a technical argument that, by waiting more than 2 months since the first appearance of Life Water, Glaceau had lost its right to bring suit, according to BBI. But Judge Scheindlin questioned whether that was a “hard-and-fast rule” and said she would not penalize Glaceau for having first sought to get Pepsi to back off via cease-and-desist letters. With the courts clogged with litigation, “Shouldn’t we encourage people to talk?” she asked.

The judge’s patience with PepsiCo seemed to wear thinner as hearing approached 2-hour mark, according to BBI.

“You’re being given everything except the label and you’re fighting me,” she said.

Then, noting that in another trade dress suit involving handbags, progress toward a preliminary injunction so far has consumed 2 yrs, she urged both parties to reach settlement.

“You can spend 2 years doing this or you can get going,” she told PepsiCo’s counsel, according to BBI. She then said she would reserve her decision for 24 hrs in order to give PepsiCo’s marketing executives a chance to work out a label compromise to their satisfaction.

As of today, Scheindlin still had not ruled on Glaceau’s request for temporary restraining order, but that order apparently would allow Pepsi to continue selling what is on-shelf, but would not allow further production for now, according to BBI.

The case has drawn wide interest in beverages biz not just because of Vitaminwater’s torrid growth but because PepsiCo entry seems to have gone further than most to duplicate look of a pioneering brand. In alternative beverages, writes BBI, it’s a given that one brand knocks off segment-defining elements of another, and Glaceau itself has not hesitated to lift elements from earlier successes such as Gatorade.

But, reports BBI, lots of beverage execs – and, it seems, the judge – think Pepsi has gone further than most in duplicating look of category leader. The hearing came at a time that, in Vitaminwater’s core NY market, Life Water seems to have retreated to a more modest display presence after a launch blitz that saw the product priced as low as 66 cents per bottle in the Duane Reade drug chain. Glaceau appears to have responded aggressively to defend its presence this week by offering its own deeply discounted price of $1 per bottle in Duane Reade. The brand ordinarily is seen on-shelf there at $1.39 or higher, BBI reported.

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