Diageo has seen off the latest US legal challenge relating to its Parrot Bay RTD cocktails but could still face a possible jury trial in 2013 over claims relating to packaging patent infringement.
The decision was handed down on August 6 after a previous March 28 court order denied plaintiffs the American Beverage Corporation (ABC) and Pouch Pac Innovations a preliminary injunction to stop sales of Diageo's frozen RTD cocktail line.
ABD owns the Daily's Cocktails brand, which is packaged using a pouch designed by R. Charles Murray of Pouch Pac Innovations; the product has been patent protected since 2005.
“With the introduction of these frozen cocktail pouches, Daily's essentially created and built an extremely successful frozen cocktail market,” ABC said after the March 28 order.
ABC alleges 'confusion in the market'
But in summer 2011 Diageo launched what ABC said in its July 2012 filing were: “Parrot Bay Cocktails packaged in pouches that – true to their name – parrot both the patented design and trade dress [general appearance, color, size, shape, labeling, etc.] of ABC's Daily Cocktails.
“Since that time, ABC has become increasingly concerned that the introduction by Diageo of a similar-looking product has created confusion in the market,” the firm said in a later release.
Back in March the US District Court for the Western District of Pennsylvania said the plaintiffs had established a likelihood of success in regard to patent and trade dress infringement claims.
“The overall impression given by the Daily's, Parrot Bay and Smirnoff packages is the same. ABC has shown that it is likely to succeed on its trade dress infringement and unfair competition claims,” judge Joy Flowers wrote.
“The patent that the plaintiffs are relying upon will likely withstand any challenges to its validity," Flowers added.
Royal Wessanen VP owns ABC, and its corporate communications VP, Carl Hoyer told BeverageDaily.com that the firm was now "weighing up its options" in terms of continuing the litigation and pushing for a jury trial.
Plaintiffs seeks damages at trial
But consideration of other factors – possible harm to plaintiffs, harm to defendants, public interest, led the court to decide again granting injunctive relief back in March, and on August 6 Flowers rejected the plaintiffs' motion to reconsider the previous ruling.
Applying for this the plaintiffs argued that the court's decision to reject their initial application on the grounds of delay should not apply since a second Diageo product – a Smirnoff frozen cocktail pouch RTD – was launched after their initial filing.
Secondly, they argued that the court improperly weighed evidence in concluding that there was not a likelihood of irreparable harm if injunctive relief were not granted.
Flowers rejected the second claim, and said regarding the first: “As discussed in the court's findings of fact and conclusions of law, the plaintiffs' seven-month delay in bringing suit, despite their awareness of the Parrot Bay frozen cocktail product, was found to be inexcusable.”
Frozen pouch sales slump
Against this legal backdrop, ABC's owner, Dutch firm Wessanen said in mid July that sales of Daily's frozen cocktails were down 20%+ in both volume and value year-over-year in 2013 to date.
Wessanen said that, after two years of strong growth, consumer research and discussions with wholesalers and retailers meant it expected further growth and led to rivals entering the space.
But six new flavors launched in spring 2013 and fresh marketing failed to check the slide, Wessanen said, with Daily's underperforming the RTD market in the year to date.
“Based on the latest consumer off-take data, we do not foresee a meaningful market improvement for the remainder of the year,” the firm added.
Diageo did not respond to a request for comment.