United States District Court, S.D. Indiana, Indianapolis Division
HEARTLAND CONSUMER PRODUCTS LLC, and TC HEARTLAND LLC, Plaintiffs,
DINEEQUITY, INC., APPLEBEE'S SERVICES, INC., IHOP FRANCHISING LLC, INTERNATIONAL HOUSE OF PANCAKES, LLC, IHOP FRANCHISOR LLC, APPLEBEE'S FRANCHISOR LLC, and APPLEBEE'S RESTAURANTS LLC, Defendants.
ORDER ON MOTION TO DISMISS
EVANS BARKER, JUDGE
matter is before the Court on Defendants' DineEquity,
Inc. (“DineEquity”), Applebee's Restaurants,
LLC (“Applebee's”), Applebee's Services,
Inc. (“Applebee's Services”), Applebee's
Franchisor, LLC (“Applebee's Franchisor”),
International House of Pancakes, LLC (“IHOP”),
IHOP Franchising, LLC (“IHOP Franchising”), IHOP
Franchisor, LLC (“IHOP Franchisor”)
(collectively, the “Defendants”) Motion to
Dismiss jointly filed pursuant to Federal Rule of Civil
Procedure 12(b)(6). Dkt. No. 15. Defendants argue that
Plaintiffs' Heartland Consumer Products LLC and TC
Heartland LLC (collectively, “Heartland”)
Complaint alleging trademark infringement, false designation
of origin, unfair competition, and trademark dilution should
be dismissed because the yellow color used by Heartland for
packaging its sucralose sweetener serves a functional purpose
and is therefore not protectable under trademark law. Dkt.
No. 16 at 6-8. Additionally, Defendants contend that
Heartland's Complaint warrants dismissal because
Heartland failed to provide each of the Defendants sufficient
notice of the claims asserted against them, as required by
Federal Rule of Civil Procedure 8, and because several of the
Defendants are improper parties to this litigation. Dkt. No.
16 at 8-14. Heartland opposes the Motion to Dismiss. Dkt. No.
19. For the reasons explained below, we DENY
Defendants' Motion to Dismiss.
is a sucralose-based sugar substitute that first became
available in the United States in September 2000. Dkt. No. 1,
¶¶ 21-22. Within three years of its initial launch
in the United States, Splenda® became the leading
low-calorie sweetener in the retail and food service
industries. Dkt. No. 1, ¶ 22. Today, Splenda® is
available in more than 80 countries and is consumers'
most preferred low-calorie sweetener in the United States.
Dkt. No. 1, ¶ 22.
September 25, 2015, Heartland purchased the Splenda®
brand from McNeil Nutritionals, LLC, a subsidiary of Johnson
& Johnson Consumer, Inc. Dkt. No. 1, ¶ 23. Through
this transaction, Heartland acquired ownership of several
standard character and design trademarks pertaining to the
Splenda® brand that were either registered or pending
registration through the United States Patent and Trademark
Office (“USPTO”) (the “Splenda
Trademarks”). Dkt. No. 1, ¶ 29. Several of the
design Splenda Trademarks specifically claim the well-known
yellow background color used for packaging individual
Splenda® packets as a protected trademark feature. Dkt.
No. 1, ¶ 31; Trademark Electronic Search System
(TESS), United States Patent and Trademark Office
(January 17, 2018, 3:47 AM),
is a parent corporation that owns and operates Applebee's
and IHOP restaurants. Dkt. No. 1, ¶¶ 11, 15. Before
Heartland acquired the Splenda Trademarks, DineEquity
purchased Splenda® through Diamond Crystal Brands, Inc.
(“Diamond Crystal”), a distributor that received
Splenda® directly from Johnson & Johnson, Inc. Dkt.
No. 1, ¶ 35. At some point between 2009-2013, DineEquity
stopped purchasing Splenda® from Diamond Crystal. Dkt.
No. 1, ¶ 36. Instead, DineEquity began packaging a
lower-quality sucralose sweetener made in China (the
“Non-Splenda Sweetener”) in yellow packets
similar to those used for packaging Splenda® and
distributed them to Applebee's and IHOP restaurants in
their franchise network with the intent “to palm off
the goodwill and association of the yellow packet”
linked to genuine Splenda®. Dkt. No. 1, ¶¶ 37,
addition to distributing the Non-Splenda Sweetener packets to
Applebee's and IHOP franchisee restaurants, Defendants
allegedly misrepresented to the franchisee restaurants and
their customers that the Non-Splenda Sweetener packets
contained genuine Splenda®, thereby creating confusion
among the Applebee's and IHOP customers. Dkt. No. 1,
¶¶ 37-41. As evidence of such confusion, Heartland
received multiple reports from Applebee's and IHOP
customers, complaining that they were unsure what sweetener
they received while dining at Applebee's and IHOP
restaurants and that they believe that Splenda® is of a
lesser quality than they have come to expect after consuming
the Non-Splenda Sweetener. Dkt. No. 1, ¶ 44.
Heartland conducted its own investigation into
Defendants' misrepresentations relating to Splenda®.
Dkt. No. 1, ¶ 45. Heartland hired investigators to
travel to several randomly selected Applebee's and IHOP
franchisee and corporate restaurants across the country. Dkt.
No. 1, ¶ 45. While at the restaurants, the investigators
asked the restaurant staffs for Splenda® and documented
their responses. Dkt. No. 1, ¶ 45. In twenty of the
twenty-eight Applebee's franchisee restaurants visited,
and in twenty-six of the thirty-four IHOP franchisee
restaurants visited, restaurant staff members affirmatively
represented that the Non-Splenda Sweetener was actually
Splenda®. Dkt. No. 1, ¶ 45. Additionally, the staffs
from a majority of the corporate IHOP restaurants visited
similarly represented that the Non-Splenda Sweetener was
genuine Splenda®. Dkt. No. 1, ¶ 45.
April 3, 2017, in light of the customer confusion created by
Defendants' use of Non-Splenda Sweetener, Heartland
initiated this action seeking damages and injunctive relief
based on claims of trademark infringement, false designation
of origin, unfair competition, and trademark dilution.
See generally, Dkt. No. 1. In its Complaint,
Heartland asserts that DineEquity, Applebee's,
Applebee's Franchisor, IHOP, IHOP Franchising, and IHOP
Franchisor (collectively, the “Franchisor
Defendants”) maintain “significant control”
over the acts of their respective Applebee's and IHOP
franchisee restaurants. Dkt. No. 1, ¶¶ 11-16. The
Complaint further alleges that Defendants infringed upon
Heartland's trademark rights and misrepresented
Non-Splenda Sweetener as Splenda® by providing
Applebee's and IHOP customers with the yellow packets of
Non-Splenda Sweetener without Heartland's authorization
and without sufficient cues to distinguish it from
Splenda®, causing customer confusion and false
designation of origin. Dkt. No. 1, ¶¶ 51-56, 61-65,
69, 75-78, 83-85.
August 17, 2017, Defendants filed their Motion to Dismiss
Heartland's Complaint. Dkt. No. 15. Defendants argue that
Heartland cannot maintain its trademark infringement claims
against them because the yellow color used for packaging
Splenda® is a functional feature signifying that it is a
sucralose product and is not a protectable trademark feature.
Dkt. No. 16 at 6-8. Defendants also contend that
Heartland's Complaint fails to properly state claims
against all of the Defendants because it refers to Defendants
collectively and does not notify each of the Defendants as to
their allegedly wrongful behaviors, as required by Federal
Rule of Civil Procedure 8. Dkt. No. 16 at 8-9. Furthermore,
Defendants claim that Applebee's Services and Franchisor
Defendants are improper parties to this action because the
Complaint does not adequately describe their involvement in
the alleged infringement. Dkt. No. 16 at 10-14.
response to Defendants' Motion to Dismiss, Heartland
argues that its Complaint sufficiently meets the notice
pleading standard of Rule 8 for its claims against each of
the Defendants by alleging that Defendants participated in
infringing activity and maintained control over its
franchisees that misrepresented Non-Splenda Sweetener as
Splenda®. Dkt. No. 19 at 6-10. Heartland further claims
that its collective references to all of the Defendants was
necessary in light of Defendants' complex corporate
structures and Heartland's lack of discovery to determine
each Defendant's proper status in relation to its claims.
Dkt. No. 19 at 10-16. Moreover, Heartland asserts that the
use of color alone can be protected as a trademark and that
Defendants' arguments regarding the functionality of the
yellow packaging are premature at the motion to dismiss
stage. Dkt. No. 19 at 16-21.
filed their Motion to Dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6). In this procedural context, we
accept as true all well-pled factual allegations in the
Complaint and draw all ensuing inferences in favor of the
non-movant. Lake v. Neal, 585 F.3d 1059, 1060 (7th
Cir. 2009). Nevertheless, the Complaint must “give the
defendant fair notice of what the . . . claim is and the
grounds upon which it rests, ” and its “[f]actual
allegations must . . . raise a right to relief above the
speculative level.” Pisciotta v. Old Nat'l
Bancorp, 499 F.3d 629, 633 (7th Cir. 2007) (quotation
marks and citations omitted). The Complaint must therefore
include “enough facts to state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007); see Fed. R.
Civ. P. 8(a)(2). Stated otherwise, a facially plausible
complaint is one which permits “the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009).