IP Law Daily, TRADEMARK—N.D. Tex.: Snack food maker’s claim of trademark infringement against competitor survives motion to dismiss, (Aug 29, 2022)

By George Basharis, J.D.

Claims of misappropriation of trade secrets under the DTSA and under the TUTSA did not survive, however, as reasonable measures to keep information secret could not be shown.

A federal court in Texas refused to dismiss claims of trademark infringement, unfair competition, and unjust enrichment by the maker of South Asian snacks against a former business partner that were premised on the use of a generic term in the companies’ branded food products. Refusing to grant summary judgment, the court explained that the likelihood-of-confusion analysis is a question of fact, and the use of generic or disclaimed terms in a registered trademark should not be ignored. However, the court dismissed claims of trade secret misappropriation arising out of the parties’ business relationship because the snack food maker failed to establish that it took reasonable measures to protect proprietary information (RRK Foods Inc. v. Sree Nidhi Corp., August 23, 2022, Fish, A.).

RRK Foods Inc. (RRK) manufactures South Asian food products that it sells around the world, including to the United States. The company’s products are branded with the registered trademark TELUGU FOODS SOUTH INDIA SPECIALS. In 2016, RRK enlisted Sree Nidhi Corp. (SNC) to import and distribute RRK-branded products in the southeast United States. According to RRK, as an importer and distributer, SNC was entrusted with proprietary trade secret information about RRK’s products, including secret and proprietary recipes, pricing, customers, and confidential information concerning the South Asian food market.

By 2021, the parties’ business relationship came to an end after RRK accused SNC of soliciting RRK’s vendors and using RRK’s proprietary information to create competing food products. Shortly thereafter, RRK sued SNC claiming misappropriation of trade secrets under the federal Defend Trade Secrets Act (DTSA) and the Texas Uniform Trade Secrets Act (TUTSA). In addition, RRK claimed that SNC’s use of the mark IN LOVE WITH TELUGU for snack foods infringed on RRK’s registered TELUGU FOODS SOUTH INDIA SPECIALS mark.

RRK’s complaint contained numerous counts including claims of unfair competition, false endorsement, false association, and false designation under the Lanham Act, trademark infringement under federal and state law, common unfair competition and unjust enrichment, and misappropriation of trade secrets. SNC moved to dismiss the complaint, arguing primarily that its mark was not likely to cause confusion with RRK’s mark and that RRK failed to take reasonable steps to protect its trade secrets.

Unfair competition and infringement. RRK’s unfair competition, trademark infringement, and unjust enrichment claims all hinged on whether SNC’s competing mark was likely to cause confusion with RRK’s mark. The court explained that RRK’s claims of unfair competition and unjust enrichment were premised on infringement and that if RRK’s infringement claim failed because confusion was unlikely, then RRK’s claims of unfair competition and unjust enrichment also would fail.

SNC argued that confusion was unlikely because the only common element in the marks was use of the word TELUGU, a generic term that is commonly used to describe food from the region of Andhra Pradesh and Telangana in South India. SNC also noted that RRK’s trademark registration disclaimed the term TELUGU and therefore the term should be excluded from the court’s likelihood-of-confusion analysis.

However, likelihood of confusion is a question of fact, and RRK pled sufficient facts to show confusion was likely, the court said. According to the court, confusion is evaluated from the perspective of the purchasing public, which is not aware that words have been disclaimed. Moreover, likelihood of confusion is evaluated by considering a mark in its entirety, including any disclaimed portion. The court then considered a number of factors and found that RRK had adequately established that confusion was likely to avoid summary judgment.

SNC insisted that TELUGU was a generic term, but a term’s classification as generic or otherwise is a question of fact, the court explained. In fact, the court found the competing marks shared many similarities. For example, they used similar colors, fonts, and lettering, and the word TELUGU was a unique and distinctive focal point that conjured an image of food products from the Telugu region. Moreover, SNC and RRK sold similar snack and food products in similar markets, and the fact that the products were inexpensive only increased the risk of confusion because buyers were less likely to exercise care when making purchasing decisions. The question of intent also favored a finding that SNC intended to cause confusion. The court observed that SNC designed and began to use its mark only after its working relationship with RRK as its importer and distributor had come to an end.

Misappropriation of trade secrets. RRK’s DTSA and TUTSA claims were premised on the unauthorized use of trade secrets. RRK argued that it was the owner of proprietary information that was unknown to its competitors and that SNC acquired knowledge of the information under circumstances that gave rise to a duty to maintain secrecy. However, the DTSA and TUTSA both define trade secrets as information that the owner has taken reasonable measures to keep secret. SNC’s motion for summary judgment claimed that RRK failed to plead facts indicating that it took any reasonable measure to keep its proprietary information secret. RRK asserted that its trade secrets were unknown to its competitors and then argued that it would have been impossible for it to have such secrets had it not taken reasonable safeguards to protect them. The court rejected the argument, agreeing with SNC that RRK had failed to adequately allege that it took reasonable measures to keep information secret.

The case is No. 3:21-cv-02943-G.

Attorneys: Megan M. O'Laughlin (Hitchcock Evert LLP) for RRK Foods Inc. John Morant Cone (Ferguson Braswell Fraser Kubasta PC) for Sree Nidhi Corp.

Companies: RRK Foods Inc.; Sree Nidhi Corp.

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