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WEIGHT WATCHERS INTERN., v. STOUFFER

August 30, 1990

WEIGHT WATCHERS INTERNATIONAL, INC., PLAINTIFF,
v.
THE STOUFFER CORPORATION, STOUFFER FOODS CORPORATION AND NESTLE ENTERPRISES, DEFENDANTS. STOUFFER FOODS CORPORATION, COUNTERCLAIM-PLAINTIFF, V. WEIGHT WATCHERS INTERNATIONAL, INC., H.J. HEINZ COMPANY AND FOODWAYS NATIONAL, INC., COUNTERCLAIM-DEFENDANTS.



The opinion of the court was delivered by: Mukasey, District Judge.

    OPINION AND ORDER

Whether or not the late Duchess of Windsor was right when she postulated that one can never be too rich or too thin,*fn1 one certainly can get rich these days by holding out the promise to make others thin. The parties to this action hold out that promise, and clash in pursuit of those riches.

Plaintiff Weight Watchers International, Inc. markets both a diet program and a line of frozen low calorie foods. Plaintiff's diet program, as set forth in greater detail below, employs a system of six food groups (bread, fruit, protein, fat, milk and vegetable) in specified quantities, called exchanges. Defendant Stouffer Foods Corporation manufactures and markets a line of low calorie frozen foods under the name "Lean Cuisine." Beginning in 1987, Stouffer launched an advertising campaign aimed primarily at those who follow the Weight Watchers program. The ads listed what were said to be Weight Watchers exchanges for Stouffer's Lean Cuisine entrees that would enable Weight Watchers adherents to use Lean Cuisine entrees in their Weight Watchers diets. In communications to those who followed its diet program, Weight Watchers disputed the accuracy of the Lean Cuisine ad campaign. This lawsuit followed, with Weight Watchers asserting trademark infringement and both sides leveling charges of deception and unfair trade practices.

Weight Watchers filed this suit in October, 1988 against The Stouffer Corporation, and later amended the complaint to include as defendants Nestle Enterprises, Inc. and Stouffer Foods Corporation. Plaintiff alleges trademark infringement, false advertising and unfair competition in violation of the Lanham Act, and state law claims of unfair competition, dilution and deceptive trade practices arising out of an advertising campaign for Stouffer Food Corporation's Lean Cuisine line of frozen entrees, including ads in 1987, 1988 and 1989. Plaintiff seeks an injunction prohibiting defendants from using the mark "Weight Watchers" in connection with any diet-related exchange information, or from stating or implying that defendants' products fit into or are interchangeable with plaintiff's diet program or exchanges. Plaintiff seeks the profits defendants earned from the advertising at issue as well as costs of suit.

Defendant Stouffer Foods Corporation filed counterclaims against Weight Watchers, H.J. Heinz Company and Foodways National, Inc., alleging deceptive and unfair trade practices and false advertising in violation of the Lanham Act, as well as state law claims of unfair competition, intentional interference with sale and injurious falsehood. Counterclaim-plaintiff asks for compensatory and punitive damages against counterclaim-defendants, as well as declaratory relief and costs.

From February 26, 1990 to March 7, 1990 the parties tried the case to the court. This opinion contains the findings and conclusions from the evidence at that trial.

I.

A. The Parties

Weight Watchers International is a corporation organized under the laws of Virginia, with its principal place of business in Jericho, New York. (Compl. ¶ 2) Weight Watchers was founded in 1963 by Jean Nidetch, a woman who resolved to lose weight but was unable to do so until she discovered that group support for her weight loss efforts provided the needed catalyst for shedding pounds. She met with a group of overweight friends in her living room in Little Neck, Long Island, and they were so successful at losing weight that soon Nidetch was leading groups in her neighborhood. The groups became a business, and over the next 15 years the business expanded across the globe; by 1978, Weight Watchers had franchises all over the world and 500,000 members per week attending meetings worldwide. (Tr. 31-32)

In 1978, the H.J. Heinz Co. bought Weight Watchers (Tr. 32); four months earlier, Heinz had acquired Foodways National, Inc., a licensee of Weight Watchers which produced frozen foods under the Weight Watchers brand name. (Tr. 56-60) Weight Watchers receives a licensing fee from the sale of Weight Watchers brand frozen food based upon a percentage of sales. (Tr. 97) Foodways is not the only Weight Watchers licensee; other companies — particularly Heinz USA, another subsidiary of H.J. Heinz Co. — produce Weight Watchers brand products such as yogurt, salad dressing, condiments and mixes. (Tr. 104)

Sales of Weight Watchers brand frozen entrees manufactured by Foodways rose from $90 million in fiscal 1982 to over $300 million in fiscal 1989. (PX 66) Also by 1989, sales of the Weight Watchers diet program topped $230 million (Tr. 33), with membership averaging over 600,000 people per week in the United States. (Tr. 33)

Weight Watchers International, H.J. Heinz Co. and Foodways National are all counterclaim-defendants in this case.

Named defendants The Stouffer Corporation (TSC) and Nestle Enterprises, Inc. (NEI) are Ohio corporations with their principal places of business in Solon, Ohio. Defendant and counterclaimant-plaintiff Stouffer Foods Corporation is a Pennsylvania corporation with its principal place of business in Solon, Ohio. TSC owns the registered trademarks "Lean Cuisine" and "Stouffer's." (Tr. 1357)

Stouffer Foods has manufactured and marketed food products since 1946, but it did not introduce the line of frozen entrees at issue here, called Lean Cuisine, until 1981. (PX 66, Tr. 371) By 1982, Lean Cuisine surpassed Weight Watchers frozen entrees in total sales, and by 1983 was selling over twice the volume of the Weight Watchers brand. (PX 66) According to a chart introduced by Weight Watchers, Lean Cuisine's sales started dropping in 1985, and in 1988 were even with Weight Watchers' sales. (PX 66) Since then, Weight Watchers and Stouffer have been competing closely and ferociously for market share.

Defendants assert that this court lacks personal jurisdiction over TSC and NEI. (Answer ¶¶ 53-57) Plaintiff tries to connect NEI with this case on the basis of Nestle Enterprises' ownership of Stouffer and Stouffer Food Corporation, and the alleged involvement of Nestle Chairman James Biggar in approving the Stouffer Foods Corporation advertisement at issue. Because there is no clear legally cognizable evidence that Biggar approved any of the ads at issue, and there is no other evidence of other connections between NEI and this case, plaintiff's claims against Nestle Enterprises are dismissed.

The Stouffer Corporation is more closely tied with Stouffer Foods Corporation, and there is clear evidence that by the middle of 1988, management at TSC knew about Weight Watchers' displeasure with the ads at issue and Weight Watchers' objections to the use of exchange information in these ads, and that they negotiated this dispute with Weight Watchers management. (Tr. 1186) In letters to Weight Watchers' Director of Legal Affairs, TSC's Senior Vice President and General Counsel and Secretary, James Ball, described the history of the Lean Cuisine ad campaign targeted toward Weight Watchers members, discussed exchange information, showed an in-depth knowledge of the ads at issue here, and pointed out Weight Watchers' own shortcomings. (PX 64A, 64B) These letters were written well before the 1989 advertisement was published, and thus indicate that TSC at the very least knew about the advertisements and probably was directly involved in the publishing of such ads. Therefore, The Stouffer Corporation is not dismissed as a defendant in this lawsuit.

B. The Weight Watchers Program

The Weight Watchers weight loss program has four parts: the food plan, the exercise plan, the self-discovery plan and group support. (Tr. 194) The self-discovery plan teaches members to recognize the situations which trigger overeating and to modify their behavior; group support, as the name suggests, provides encouragement from others for each member's weight loss efforts. (PX 85) It is only the food plan, however, that is at issue in this case. Group leaders stress five keys to the food plan: daily totals and weekly limits on what members can eat; exchange lists, which allow members to choose certain amounts of food from each of six food groups; so-called "lifestyle options," which allow members to individualize the program; menu planners; and checklists which members must fill out to keep track of what they eat. (Tr. 197-98) These elements are interrelated and support the basic mandate of limiting food intake.

A food "exchange" is an approximation of the caloric value of foodstuffs in a given portion size. (Tr. 1108) The exchange element of the food plan is designed to ensure that members eat a well-balanced array of foods and consume them in proper amounts. The system of food exchanges largely obviates the need for counting calories, a process that has two drawbacks: first, it is difficult and often confusing for laypeople; second, if pursued without attention to the nutrient content of food, it can lead to an unbalanced and unhealthful diet. Instead, the exchange system assures that members consume the allotted number of food exchanges of the six designated food exchange categories.

In Week One of the Weight Watchers program, a new member receives a booklet containing six exchange lists. They are for fruits, vegetables, fats, protein, bread, and milk. Weight Watchers explains an exchange list as a group of foods with similar caloric and nutrient content. (PX 86-A at 3) An exchange is one food item in the amount listed. Foods on the same exchange list may be selected interchangeably to fulfill that day's quota for that particular food group. (Id.) For example, in the first week, a woman must consume 2 to 3 fruit exchanges, at least 3 vegetable exchanges, 3 fat exchanges, 5 to 6 protein exchanges, 2 bread exchanges, and 2 milk exchanges per day.*fn2 Amounts are somewhat different for men and teenagers. (Id. at 1)

In addition to the exchanges, members are allotted a certain number of "optional calories" each week — that is, an allowance of calories members can "spend" by eating certain foods over and above the exchanges allotted for each day or week. (See, e.g., PX 86-A at 3). During the first week of the program, a member may spend 150 optional calories on foods listed on "options lists" in the Weight Watchers booklets. These optional calorie foods include limited quantities of cocoa, honey, ketchup, jam, or extra amounts of foods listed under the exchanges. Each week for the next four weeks of the program, the exchange lists are expanded to include more food options and the optional calorie allowance is expanded to 500 calories.*fn3

The program also places weekly limits on specific foods which are high in calories, fats and cholesterol, such as eggs, hard or semisoft cheese, beef, lamb or pork, and organ meats. (PX 86-A at 6) These foods fall under the "protein" exchange categories; when they are ingredients in Weight Watchers products, their presence is specially noted in parentheses so members know that they are consuming "limited exchanges." (DX JG) Further, although members are allowed unlimited vegetable exchanges, no more than one of these vegetable exchanges per day may be fulfilled by eating tomato products or juices. (PX 86-E at 5)

The concept of using food group "exchanges" in diet plans did not originate with Weight Watchers. Exchanges simplify a meal planning system by reducing calorie intake while at the same time providing easy values that a dieter can remember without having to count calories. (Tr. 1109) Dieticians for many years have used food exchanges in their work; a dietician, by examining a recipe and nutritional information for a commercial food product, can assign exchange values to the product to allow its use in a diet program. (Tr. 1111-12) The system of exchanges the dietician uses may vary depending upon the goal of the diet — that is, whether the diet is meant for weight loss or to limit certain foods for medical reasons. (Tr. 1108) But exchange values used in weight loss diets are similar, whether they are set by Weight Watchers or other dieticians. The American Dietetic and American Diabetic Associations (ADA) publishes exchange lists for foods, meant to be used by people with diabetes and people on weight loss programs; these exchange categories are quite similar to the ones used by Weight Watchers. (DX LK, LL, LM) The ADA has been using the exchange concept and providing exchange lists to nutritionists and dieticians for many years, and in fact used the term "exchange" before Weight Watchers did. (DX LK at 060438) Stouffer lists ADA exchanges for each Lean Cuisine entree on the product's box.

In 1984, Weight Watchers developed a new diet program called Quickstart, which was designed to help members lose weight faster by further reducing their calorie intake in the first few weeks. (Tr. 46-47) It was at this time that Weight Watchers formally adopted the system of "exchanges"; prior to that, it used other terms such as "servings." (Tr. 615) Stouffer alleges that one of the primary objectives of Weight Watchers' new food plan and its optional calories was to sell more Foodways frozen meals and to discourage members from buying competitors' frozen diet meals. Although there is no evidence that the new plan was meant to hinder competition, there is evidence that Weight Watchers changed the diet in response to Foodways' concern that in the first two weeks of that plan members could not eat most of Foodways' frozen meals. (DX ES, EQ)

When Weight Watchers first showed the plan to Foodways, Foodways strenuously objected to the new plan because of the short lead time Weight Watchers gave Foodways to change its products, and because the plan limited use of Foodways entrees; an intramural dispute between the two Heinz-owned companies ensued. (DX ES, EV) As a result, Weight Watchers changed the plan to include "optional calories." This system of optional calories allowed members to use almost all Weight Watchers brand products even at the beginning of the diet. (DX EQ, ES, ET, Tr. 122-128)

It is evident that since the Heinz takeover, the Weight Watchers program has been somewhat influenced by the interest of Heinz, including its subsidiaries, to sell low calorie products. Nevertheless, Stouffer's contention that this undisclosed influence constitutes misrepresentation by Weight Watchers is absurd. The primary goal of Weight Watchers is still to help its members lose weight, and Stouffer has presented no evidence to the contrary. Indeed, there is no evidence that Weight Watchers followed suggestions by Foodways to instruct Weight Watchers group leaders to push Weight Watchers frozen meals at group meetings (Tr. 131), although group leaders do hand out information and coupons for Weight Watchers food products at these meetings. (Tr. 131-132)

C.  Frozen Food and the Weight Watchers Program

Each box of Weight Watchers brand frozen entrees lists the Weight Watchers exchanges for that entree. These exchanges are calculated by Weight Watchers' manager of license operations, Allen Ho. Ho also supervises Weight Watchers' quality control of Foodways and other licensees' products. (Tr. 620-622; 643-45) Ho testified at trial that he calculates exchanges in consultation with the nutrition department based upon published program information given to Weight Watchers members and leaders, and other "guidelines" — some in his head and some written down — that govern the calculation of exchange values for ingredients used specifically in processed food, such as preservatives, flavorings and texturizing ingredients. (Tr. 622-624; 630-634) As discussed below, in Section III of this opinion, Ho's decisions, based on undisclosed criteria, seem in some instances to be arbitrary.

D.  Stouffer's Advertisements

When Stouffer Food Corporation launched its Lean Cuisine product line in 1981, it began to offer by mail booklets listing ADA exchanges and Weight Watchers exchanges for Lean Cuisine entrees. (DX G, H, I, J, K; Tr. 803-804) In 1987, Stouffer attempted to schedule an advertisement in Weight Watchers magazine, but the magazine rejected the advertisement. (DX JK; Tr. 805-806) In June and September 1987, Stouffer ran an advertisement in Parade magazine with the headline "LEAN CUISINE ENTREES PRESENT 25 WAYS TO GET MORE SATISFACTION FROM YOUR WEIGHT WATCHERS PROGRAM," and a smaller headline: "WEIGHT WATCHERS EXCHANGES FOR LEAN CUISINE ENTREES." (PX 9; Tr. 807) Below these headlines, and taking up most of the space in the ad, were pictures of Lean Cuisine entree boxes for each of the 25 entrees. Under the picture of each box, Weight Watchers exchange information was listed. At the very bottom of the ad, in small print, Stouffer placed the disclaimer: "Weight Watchers is a registered trademark of Weight Watchers International, Inc. The exchanges provided here are based solely on published Weight Watchers exchange information and do not imply approval or endorsement of those exchanges or of LEAN CUISINE entrees by Weight Watchers International, Inc." A dotted line broken by the phrase "clip here" framed the perimeter of the advertisement. This configuration suggests the ad was meant to be cut out and affixed to a wall, bulletin board or perhaps by magnets to a refrigerator door, where it could be consulted in aid of selecting a Lean Cuisine frozen entree.

In June, 1987, Weight Watchers sent a "Flash Bulletin" to its North American franchisees alerting them to the claim that Lean Cuisine fits into the Weight Watchers program, and emphasizing that group leaders should respond to any questions about this ad by saying that "we only stand behind Weight Watchers products and any claims by other products cannot be substantiated. We do not dispute or confirm claims by other companies. Stouffer's Lean Cuisine remains a separate company with no affiliation to Weight Watchers." (DX BC) This statement echoes a section of the Weight Watchers guide for group leaders. (DX BC)

In January 1988, Stouffer ran a slightly different advertisement in Parade magazine. (Tr. 815) This one declared in different typeface: "Stouffer's presents Weight Watchers exchanges for all 28 Stouffer's Lean Cuisine entrees." (PX 10) As in the previous ad, the boxes were depicted with the Weight Watchers exchange information below each, and a dotted line framed the pictures of the boxes and most of the copy. The disclaimer in this advertisement, although slightly larger than in the previous ad, was printed below the line where consumers were supposed to cut out the advertisement.

Also in January, 1988, Stouffer conducted a direct mail campaign in which it sent a letter, a copy of the 1988 Lean Cuisine advertisement (PX 10) and a coupon to Weight Watchers members. (PX 11; DX BD)

In April, 1988, Charles Berger, the President and Chief Executive Officer of Weight Watchers, sent a letter to all Weight Watchers members describing the 1988 Lean Cuisine ad, and advising members that:

    "First, we want you to know that Weight
  Watchers did not sponsor or otherwise cooperate
  in this advertisement.
    Second, you should be advised that Stouffer's
  has incorrectly represented the `Weight Watchers
  Exchanges.' In no instance has Optional Exchange
  Information been listed, although this is
  indicated by the ingredients stated on the
  package. Similarly, Fat Exchange and Vegetable
  Exchange information is omitted in certain cases.
  Also, certain Limited Vegetable Exchanges and
  Protein Exchanges are not identified.
    As you should be aware, Weight Watchers does
  not review or otherwise provide Exchange
  Information for commercially prepared branded
  food products such as Stouffer's Lean Cuisine
  entrees.
    The only Exchange Information which we do
  provide and stand behind is that on Weight
  Watchers brand products. . . ." (DX BT)

In February, 1989, after this litigation already had commenced, Stouffer ran a third advertisement; this one ran in newspapers and carried a coupon and the headline, "Stouffer's presents exchanges for all 35 Lean Cuisine items to fit into your Weight Watchers program." (PX 14, 15) The exchanges for these products again were listed under each picture, although these exchanges were more detailed, and included footnotes showing "limited meat" choices, semisoft/hard cheese and tomato paste/puree. The same disclaimer was printed, although in this ad it appeared inside the dotted line marking where to cut out the ad.

II.

Weight Watchers owns six registrations for its mark "Weight Watchers," which is used on and in connection with frozen food products, dry foods, a magazine, and as a service mark for the weight loss program discussed above. (PX 2-8)

Weight Watchers bases its trademark infringement and unfair competition claims on §§ 32 and 43(a) of the Lanham Act, and also brings a false advertising claim under § 43(a) of the Act. 15 U.S.C. § 1114(1) and 1125(a). Because Weight Watchers has registered its "Weight Watchers" trademark, it may rely upon § 32(1)(a) of the Act, see Cuisinarts, Inc. v. Robot-Coupe Intern. Corp., 509 F. Supp. 1036, 1041 (S.D.N.Y. 1981), which provides in pertinent part:

  "(1) Any person who shall, without the consent of
  the registrant —
  (a) use in commerce any reproduction,
  counterfeit, copy, or colorable imitation of a
  registered mark in connection with the sale,
  offering for sale, distribution, or advertising
  of any goods or services or in connection with
  which such use is likely to cause confusion, or
  to cause mistake, or to deceive; . . . shall be
  liable in a civil action by the registrant for
  the remedies hereinafter provided. . . ."

15 U.S.C. § 1114(1). Section 43(a) of the Lanham Act makes actionable both false designation of origin and false advertising.*fn4 15 U.S.C. § 1125(a). The same facts which substantiate an action for trademark infringement under § 32 will support a claim for false designation of origin or sponsorship under § 43(a). See Thompson Medical Co., Inc. v. Pfizer Inc., 753 F.2d 208, 213 (2d Cir. 1985); Cuisinarts, 509 F. Supp. at 1042.

A.  Strength of the Mark

In analyzing whether plaintiff has proved trademark infringement or unfair competition under § 43(a), it is helpful as a threshold matter to examine how much protection the mark at issue deserves.*fn5 Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 871 (2d Cir. 1986).

"Weight Watchers" is a registered trademark. When a mark is registered under the trademark laws, the mark is "presumed to be distinctive and should be afforded the utmost protection." Lois Sportswear, 799 F.2d at 871 (citing Vibrant Sales, Inc. v. New Body Boutique, Inc., 652 F.2d 299, 304 (2d Cir. 1981), cert. denied, 455 U.S. 909, 102 S.Ct. 1257, 71 L.Ed.2d 448 (1982)). Proof of secondary meaning is not required when ...


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