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Eggshells and private labels

Brand owners and retailers have developed a unique rapport when it comes to private labels.

“It’s one of the most interesting relationships I’ve ever observed,” said Johnson & Johnson’s Jake D. Feldman, who moderated a panel on the topic yesterday. “Not only are they our customers, but they’re also our competitors.”

In what Feldman described as an “eggshell” relationship, the parties occasionally clash. Retailers must ensure their store brands don’t too closely resemble national brands. Often, they occupy the same shelves in stores. 

Andrew M. Solomon, associate general counsel of manufacturer Perrigo, said the company conducts extensive research to avoid disputes or, when responding to claims of infringement, defend its position. Perrigo develops, manufactures and distributes over-the-counter drugs and infant formula to stores like Target and Walmart. “We don’t want people buying Target store brands thinking they’re buying Johnson & Johnson products,” he told the crowd. 

“That’s interesting,” Feldman said, eliciting laughter from the audience. “I wonder if many brand owners think the same way.”

The panel also looked at McNeil Nutritionals v. Heartland Sweeteners, a recent case in which McNeil alleged Heartland’s private-label artificial sweetener’s packaging was too similar to Splenda’s. The Third Circuit ruled that while private label manufacturers could develop packaging somewhat similar to those of branded products, they could not produce trade dress that is essentially a duplicate but for a “tiny differentiating label.”

“This case affirms trade dress packaging as protectable,” said James D. Weinberger of Fross, Zelnick, Lehrman & Zissu. “It gives brand owners real direction about what kinds of things you can use on products and things you can’t.”

Still, Weinberger criticized the “broad general statements” the Third Circuit made regarding clarity on product source. “If I were a brand owner, I would not be deterred to pursue a case,” he said.

Feldman also cautioned private-label manufacturers and retailers from taking too much comfort in the decision. “I don’t think it’s completely clear,” he told attendees. “I don’t think this case is as helpful as a definitive case on private labels.”     

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