Kraft vs Bega trademark dispute sparks peanut butter wars, as Bega accused of “blatant violation” of IP rights

A cross-Pacific trademark stoush has elevated the peanut butter wars beyond a simple question of whether crunchy or smooth is better, with two iconic brands set to battle it out over the breakfast spread.

The now-US-owned Kraft Foods Group has submitted a mediation and arbitration request in a New York District Court naming Bega Cheese Limited and accusing the Australian dairy producer of misusing the design of Kraft’s iconic peanut butter jar.

Bega snapped up the rights to the Kraft brand in Australia from food giant Mondelez earlier this year.  When this occurred, Bega was reportedly allowed to continue using the Kraft logo and peanut butter design for a limited time.

Mondelez acquired the rights to a range of Kraft products when the company spun off its brands in 2012, placing more of a focus on US markets.

Court documents suggest the rights to the Kraft brand across a range of products, which were initially granted to Mondelez and which Bega was allowed to use when it acquired the rights to Kraft in Australia, expire on December 31.

At this point, Kraft claims all rights and trademarks will revert to Kraft’s property.

News.com.au reports that on Monday, Kraft released a statement to customers announcing plans to return “Kraft Peanut Butter” to shelves in 2018.

But with two months to go until the trademark expiration, Bega has made changes to Kraft’s peanut butter design, leaving most factors of the design intact apart from the logo on the jar, which has been changed from “Kraft” to “Bega”.

In a recent statement, Bega notified consumers of the change, saying the packaging was “refreshed”, and telling shoppers to “keep your trolley local and continue buying the same great tasting Peanut Butter you have been for the past 55 years”.

“Bega assures Australians that the Peanut Butter they love is exactly the same … the same ‘never oily, never dry’ recipe, the same taste, made by the same people, at the same factory,” the company said.

Kraft alleges “blatant” violation

In the mediation request, Kraft claimed Bega’s product design is a “blatant violation of Kraft’s intellectual property right” and called on to the company to comply with arbitration, or potentially lose the rights altogether.

“In direct contravention of the license agreement, Bega is using Kraft’s distinctive trade dress separate and apart from the KRAFT trademark, and has indicated that it intends to continue using Kraft’s distinctive trade dress even after the expiration of the Agreement at the end of this year, all in a deliberate effort to trade off the goodwill of the KRAFT brand, cause consumer confusion, and irreparably harm the value of Kraft’s intellectual property,” Kraft claims.

Intellectual property lawyer and director at Hitch Advisory, Olivia Hitchens, said Bega’s approach could be aimed at getting current consumers familiar with the Bega logo and have them start to think of it as a Bega product.

“This is so when the end of the year comes, shoppers don’t care about the Kraft label association. They’ll just go to the supermarket and look for the yellow or blue label, pick it up, and keep doing what they’ve been doing,” Hitchens told SmartCompany.

“This is a big problem for Kraft as it heavily dilutes the trademark’s value.”

Bega’s argument, says Hitchens, is that the company accepts they cannot use the Kraft name, but instead believes the trademark does not extend to the look and feel of the packaging.

The elements of the design form the “Peanut Butter Trade Dress”, mentioned in the statements from Kraft. The court documents describe the trade dress as “a combination of a jar with a yellow lid and a yellow label with a blue or red peanut device, with the jar having a brown appearance when filled”.

“This well-known combination of elements has been used for KRAFT brand peanut butter in Australia since the 1990s, with the red or blue peanut device added in approximately 2007, and consumers in Australia have long associated the Peanut Butter Trade Dress with the KRAFT brand,” Kraft states.

SmartCompany contacted both Bega and Kraft but did not receive a response prior to publication. However, a spokesperson for Bega told news.com.au it “cannot speculate on what Kraft has planned”.

“What we do know is that it (Kraft’s new peanut butter) will be a different recipe, made in a different factory by different people,” the spokesperson said.

“Bega is proud to own and manufacture the same great tasting peanut butter that Australians have loved for 55 years in the exact same factory. The only change to Australia’s favourite peanut butter is that it will be sold as Bega Peanut Butter.”

In a statement also to news.com.au, a Kraft spokesperson said “the future of the Kraft brand has never been in doubt”.

“A series of historical corporate decisions saw the brand licensed to an external company for a limited period of time under strict conditions. It has always been our intention to continue with Kraft products in Australia,” the spokesperson said.

“Kraft Singles will appear on supermarket shelves shortly and Kraft Peanut Butter in the New Year; both of which will be manufactured locally.”

Businesses warned to ensure clarity with licensing agreements

Hitchens says a typical agreement between businesses passing on the rights of products will include the name of the brand the other party can use, and stipulations around trade dress, including tag lines, colour schemes, and appearance.

“It’s usually quite specific, but it can also be limited solely to a name, depending on the contract,” she says.

If businesses are looking to license any intellectual property to a third party, Hitchens recommends ensure the licensing agreement has a “strict definition” of what’s being licensed, how it’s being used, and what happens at the end of the agreement.

“If you’re going to be using the IP at the same time, that needs to be made clear too. Be clear about what’s being licensed and what may be used, and in what territories,” she says.

“And make sure you lay out what happens with the products once the agreement ends.”

Hitchens believes the case will go through mediation as both parties will likely want to avoid formal proceedings, and “both of them need to keep selling peanut butter”.

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