Mountain Dew makes inroads at 2nd Circuit to overturn energy drink injunction

MANHATTAN (CN) — The Second Circuit looked ready Wednesday to lift the injunction that forced parent company PepsiCo to rename its new Mountain Dew energy drink last year.

PepsiCo dropped the word "Rise" from its Mtn Dew Rise Energy product roughly two weeks after a New York federal judge ruled in November that drink was likely to confuse customers when placed on the same store shelves as wares from the canned coffee company Rise Brewing.

U.S. District Judge Lorna Schofield warned specifically that Rise Brewing’s business could face an "existential threat" from Mountain Dew's product.

Paul Tanck, an attorney for the coffee company with the firm Alston & Bird, urged the Second Circuit to affirm, telling the court Wednesday that “there was actual confusion” among shoppers who saw the two Rise-branded drinks near each other on store shelves where coffee drinks, energy drinks and coffee-flavored energy drinks commingled.

The argument made little impression, however, on U.S. Circuit Judge Pierre Leval, a Clinton appointee who in 1990 penned an influential analysis on the transformative-use doctrine for Harvard Law Review titled “Toward a Fair Use Standard.”

Rise Brewing should have anticipated such consumer confusion, Leval chided, because that is a “risk that one takes on when you choose a weak mark.”

“This seems to me to be a very weak mark, as a matter of law," he continued.

Judge Leval appeared vexed in particular that Rise would claim infringement despite having entered the market “with open eyes,” knowing that the coffee and beverage field was filled with other “Rise”-branded drinks.

“When you first applied for trademark, you were rejected on the grounds that were already a number of Rise, especially with respect with coffee," Leval said. "And you eventually prevailed by changing it from Rise Coffee to Rise Brewing on the argument there was room for one more. Now you’re saying there’s no room for another, only you can have it.”

PepsiCo noted as much in its appeal brief, saying Rise Brewing had "expressly relied on the 'crowded field' doctrine, which recognizes that where multiple companies use a common term in a particular category, consumers will be 'able to distinguish between different marks based on small differences in the marks' and will not be confused unless the overall commercial impression, as encountered by consumers in the marketplace, is essentially identical."

As to the strength of the mark, Leval noted that Judge Schofield gave "huge importance to the fact that the coffee drink had spent $17 million on publicity."

Publicity, however, "is not about the adherent strength of the mark but only about acquired strength," Leval continued. "It doesn’t to me really say much very much given the size of the U.S. marketplace.

“One of the most important policies of the trademark law is, on the negative side, not to give anybody an exclusive right to exclude others from using the language in its ordinarily understood implications, preventing others from using the mark, as Pepsi-Cola is using ‘Rise’ in an energy that carries some of the same implications,” Judge Leval said.

“The trademark law doesn’t contemplate giving some exclusive rights over that kind of thing,” he added.

PepsiCo's appeal contends that the District Court failed to acknowledge the "striking difference in the overall impression of the products’ visual theme, font, color scheme, and logo design."

In court Wednesday, the attorney for Rise Brewing said that the company's nitro-brewed coffee is "organic" and "good for you," while the Mountain Dew energy drink is loaded with artificial sweeteners. He said the trademark confusion creates a false implication of affiliation with the soda manufacturer.

Rise Brewing learned in January 2021 that PepsiCo intended to launch a fruit-flavored caffeinated canned beverage under the "Mtn Dew Rise Energy" mark. Despite a letter from Rise Brewing’s lawyers that urged PepsiCo to “abandon any intent” to use the Rise Energy, the two parties did not reach any agreement and PepsiCo launched the drink in March 2021.

Riseandshine Corporation, doing business as Rise Brewing, initially brought the suit in Illinois, but PepsiCo transferred the case to the Southern District of New York.

Before granting Rise Brewing a preliminary injunction, Schofield held an evidentiary hearing via video conference on Oct. 8, 2021.

The three-judge appeals panel reserved their decision on Wednesday afternoon.

U.S. Circuit Judge Leval was joined on the panel by Senior U.S. Circuit Judge Denny Chin, an Obama appointee, and U.S. Circuit Judge Steven Menashi, a Trump appointee.

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