31 October 2018Trademarks

Judge may ditch some counterclaims in Nestlé trademark dispute

District Judge John Kronstadt has stated his “tentative” plans to partially grant and partially deny Nestlé’s motions to dismiss counterclaims that were made by its franchisee, amid the parties’ IP dispute.

Kronstadt shared his views (pdf) in a hearing at the US District Court for the Central District of California on Monday, October 29.

The dispute dates back to October 2016, when the Canadian arm of multinational food and beverage corporation Nestlé accused its franchisee, Crest Foods, of trademark infringement.

Crest Foods operates dessert cafés under the Nestlé brand, but Nestlé claimed that it had used the ‘Nestlé’ and ‘Toll House’ trademarks without authorisation.

In its complaint (pdf), Nestlé claimed that Crest Foods had also wilfully and materially breached written contracts concerning the marks, which were authorised in 2000 for the “limited purpose of developing a series of quick service cafés that reflect, honour, and enhance the Nestlé Toll House brand”.

However, Crest Foods allegedly “drastically exceeded” the scope of its rights by engaging in a “series of unauthorised uses of the famous” trademarks.

In response to the allegations, which Crest Foods denied, the dessert café operator filed a number of counterclaims against Nestlé.

In the latest amended counterclaim, filed in June, Crest Foods said that Nestlé had acted in bad faith in its dealings with Crest Foods and had committed “tortious conduct”.

Nestlé’s conduct was intended to frustrate Crest Foods’ business agreements with other Nestlé entities, and has cost the dessert café operator more than $190 million to date, according to Crest Foods.

Other counterclaims included trade libel, unfair competition, and negligent frustration of purpose.

Nestlé asked the court to dismiss Crest Foods’ counterclaims, as there is “no legal or factual basis” for them. Nestlé made reference to Crest Foods’ previous counterclaims which, last year and this year, the court dismissed for this same reason.

Crest Foods “continued to amend its counterclaims for the improper purpose of needlessly complicating and increasing the costs of this litigation”, Nestlé said.

On Monday’s hearing, Kronstadt did not specify which aspects of the counterclaims he plans to grant in part and deny in part, and he warned the parties that his current views are only “tentative”.

Kronstadt then set deadlines relating to the filing of reports, and said that a hearing on all the motions would take place on April 15, 2019. A final pre-trial conference will be held on June 10, 2019.

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10 October 2016   Nestlé has targeted its franchisee Crest Foods, an operator of dessert café restaurants, in a trademark infringement claim.