• Three Chocolate Companies Run Three Different Ways

    by  • August 19, 2009 • trademark

    If you’re interested in trademark management in large enterprises, or management of large enterprises in general, there’s an interesting decision in a multidistrict antitrust case against the chocolate candy industry. The opinion discusses whether the court has personal jurisdiction over some of the foreign family members of Cadbury, Mars and Nestlé. The case also provides great insight into how companies in the same business can be so different in their management style and structure.
    For Mars, the issue was whether Mars Canada was subject to the jurisdiction of U.S. courts. Mars Canada owns the trademarks it uses in the Canadian market.
    For Nestlé, it was whether the ultimate parent, Nestlé S.A. (of Switzerland) and Nestlé Canada were subject to U.S. jurisdiction. The Nestlé trademarks are owned by Swiss subsidiary Société des Produits Nestlé S.A. and the patents held by Swiss subsidiary Nestec, S.A., with royalties paid to the parent. Employees called regional intellectual property advisors (RIPAs) are liaisons between the IP companies and the operating companies.
    For Cadbury Schweppes (now split into Cadbury plc and Cadbury Holdings), it was whether the parent (plc) and its single subsidiary (Holdings), both British companies, were subject to U.S. jurisdiction. Unfortunately there’s no discussion of the trademark ownership, and the manufacturing isn’t entirely clear from the decision either – the decision says that in the late 1980’s Cadbury Schweppes withdrew from the U.S. market and Hershey became the U.S. trademark licensee for Cadbury-branded goods, but it’s also clear from the decision that Cadbury has its own U.S. business too.
    The opinion explains in detail how each of the parents manage their global businesses. It ranges from very little control (in the case of Mars) to a great deal of control (in the case of Cadbury). For all three companies, the court analyzed whether the foreign entity so controlled its U.S. entity that the two were alter egos. The court used the following factors to decide – note that trademarks plays a significant part:

    (1) the parent owns all or a significant majority of the subsidiary’s stock,

    (2) commonality of officers or directors exists between the two corporations,
    (3) the group possesses a unified marketing image, including common branding of products,
    (4) corporate insignias, trademarks, and logos are uniform across corporate boundaries,
    (5) group members share employees,
    (6) the parent has integrated its sales and distribution systems with those of its subsidiaries,
    (7) the corporations exchange or share managerial or supervisory personnel,
    (8) the subsidiary performs business functions that would ordinarily be handled by a parent corporation,
    (9) the parent uses the subsidiary as a marketing division or as an exclusive distributor, and
    (10) the parent exercises control or provides instruction to the subsidiary’s officers and directors.

    Evaluating all the factors, Mars Canada, Nestlé S.A., and Nestlé Canada weren’t alter egos of their U.S. entities; Cadbury plc and Cadbury Holdings were, even though Cadbury USA was not named as a party. The case is a roadmap for how to exercise adequate control over the use of marks while still maintaining the separate corporate identities of the enterprise family members.

    In re Chocolate Confectionary Antitrust Litigation, No. 1:08-MDL-1935, — F.Supp.2d —-, 2009 WL 2447992 (M.D. Pa. Aug. 11, 2009).


    © 2009 Pamela Chestek