For 76 hours this past weekend, dozens of lawyers from two corporate law firms representing two makers of rehydration drinks did battle in a trade dress, trademark dilution, tortious interference and antitrust lawsuit in federal court in Texas.
The heated litigation dispute with Alston & Bird representing Mexico-based Laboratorios Pisa and Baker Botts defending PepsiCo ended Sunday at 10:19 p.m., but lawyers on both sides anticipate the fight to continue later this week.
In an intense, fast-moving and high-stakes intellectual property dispute that seemed to take a new twist or turn every few hours, Pisa and its U.S. subsidiary, CAB Enterprises, claim that PepsiCo illegally designed, branded, marketed and launched its new product called Gatorlyte with the intent to cause customer confusion with Pisa’s successful and trademarked Electrolit drink.
The flurry of litigation happening between Thursday evening and Sunday night went like this: Pisa filed the IP lawsuit in McAllen federal court as well as a separate petition for a temporary restraining order. A federal judge reviewed Pisa’s complaint and affidavits, then granted the TRO and set a hearing for this coming Friday.
PepsiCo filed a motion for reconsideration in the trial court and later submitted a writ of mandamus under seal to the U.S. Court of Appeals for the Fifth Circuit. A three-judge panel was appointed, which instructed Pisa lawyers to provide response briefs by 8 p.m. last night. The lawyers at Alston & Bird filed their reply brief and a request to have PepsiCo’s petition unsealed.
At 10:19 p.m., the Fifth Circuit panel, which included judges Edith Brown Clement, Gregg Costa and Cory Wilson, issued a two-page decision reversing the trial court, lifting the TRO and instructing the judge to conduct further hearings on the dispute.
In court documents, Pisa claims that it learned on Feb. 12 that PepsiCo planned to launch Gatorlyte in South Texas by planning to copy the look and feel of Electrolit.
Pisa immediately hired lawyers at Alston & Bird in New York and Dallas, who worked day and night for six days to prepare to file the complaint.
In a 54-page lawsuit filed late Thursday, the Alston & Bird team, led by intellectual partner Paul Tanck of New York and litigation senior associate Sam Bragg of Dallas, argued that PepsiCo “resorted to an unethical and illegal campaign of copying and intimidation, including using its monopoly position to prevent ELECTROLIT beverages from being sold in U.S. stores altogether.”
“PepsiCo, a repeat marketplace bully, must be enjoined from succeeding in its scheme to unlawfully intimidate, slavishly copy, and ultimately muscle out a much smaller, family-owned competitor from the U.S. market,” Tanck and Bragg wrote in the lawsuit.
“PepsiCo’s message was clear: it’s us or them,” the complaint stated. “For retailers, this is not a choice at all. PepsiCo’s monopolization of the sports drink market and the larger beverage market, in combination with their substantial stake in the market for foodstuffs makes it impossible for retailers to say no to PepsiCo.”
U.S. District Judge Micaela Alvarez of McAllen issued an 11-page opinion ruling that Pisa “demonstrated a substantial likelihood of success on the merits sufficient for a temporary restraining order.”
“Plaintiffs demonstrate via an affidavit of the commercial director of CAB Enterprises, Inc. that they will lose revenue ‘as customers are confused into buying Gatorlyte products when they mean to buy Electrolit products’ and that their substantial investments in garnering the loyalty of retailers and customers could be quickly wiped out by the confusion resulting from conflation of ELECTROLIT products with Gatorlyte products,” Judge Alvarez wrote.
“The court finds that the likelihood of confusion, potential irretrievable loss of shelf space and customer and retailer goodwill, and the proximity of defendants’ planned launch constitute a substantial threat of immediate and irreparable harm to plaintiffs,” the judge stated.
Judge Alvarez told the parties to prepare for a preliminary injunction hearing set for Feb. 26.
Over the weekend, Baker Botts filed a motion asking Judge Alvarez to reconsider her TRO. When the judge didn’t respond, Durst filed the writ of mandamus with the Fifth Circuit. Both documents by PepsiCo were filed under seal.
Durst, in an interview with The Texas Lawbook late Sunday, said he and PepsiCo “feel confident about being vindicated” by the court.
“The TRO was granted ex parte without PepsiCo providing the judge the relevant facts and context,” said Durst, who has represented PepsiCo in various matters. “The judge heard only one side.”
Late Sunday afternoon, the Fifth Circuit asked Pisa lawyers to provide a written response.
Tanck and Bragg, in a separate interview Sunday with The Lawbook, said Pisa presented the court with “smoking gun” evidence of PepsiCo’s illegal efforts under the Lanham Act.
“We detailed for the judge PepsiCo’s history of doing this, and I’m anticipating a lot more documents [through discovery] that show PepsiCo’s actions,” Tanck said. “There is dual harm happening here – harm to our client and our brand and harm to the customer.”
The Fifth Circuit panel unanimously granted PepsiCo’s mandamus petition, but Judge Costa dissented on the question of whether PepsiCo’s documents should be unsealed. Judge Costa concluded that the parties have not overcome the public’s right to access court documents.
The next hearing in the case is set for Friday, Feb. 26, at 9 a.m. in Judge Alvarez’s courtroom in McAllen. It is not known if it will be an in-person hearing or via Zoom.