A federal judge in McAllen issued a new, second temporary restraining order Saturday enjoining PepsiCo from making, marketing and selling its new rehydration drink Gatorlyte on the grounds that the global soft drink giant engaged in anticompetitive conduct against Mexico-based Laboratorios Pisa and its trademarked Electrolit drink.
Exactly one week ago, U.S. District Judge Micaela Alvarez of McAllen issued a similar TRO prohibiting PepsiCo from launching Gatorlyte stating that Pisa and its U.S. subsidiary, CAB Enterprises, would likely prevail on its claim that PepsiCo illegally designed, branded, marketed and launched Gatorlyte with the intent to cause customer confusion Electrolit.
But that TRO lasted only 48 hours before the U.S. Court of Appeals for the Fifth Circuit lifted the order and sent the case back to Judge Alvarez to conduct a full hearing and reconsider her decision.
The judge held a hearing Friday and issued a 21-page opinion late Saturday stating that Pisa showed “a substantial likelihood of success showing substantial confusion regarding the products at issue.”
“Here, plaintiffs have shown a substantial threat of immediate and irreparable harm in the loss of control over their trade dress,” Judge Alvarez wrote. “Because plaintiffs ‘cannot control defendants’ use of its trade dress, it is powerless to control its reputation and place in the market without an injunction.’
“Because plaintiffs have shown a prima facie case of a likelihood of confusion between ELECTROLIT and defendants’ GATORLYTE, plaintiffs’ loss of control over its intellectual property, customer reputation, and goodwill is sufficient to support entry of a temporary injunction,” the judge opined.
Federal court records showed that PepsiCo had not filed a notice of appeal on Sunday, but legal experts predicted that they will.
Alston & Bird represents Pisa in the litigation, while Baker Botts defends PepsiCo.
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 to prepare to file the complaint.
The Alston & Bird team, led by intellectual property law 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 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.”
Tim Durst, in an interview with The Texas Lawbook last week, said he and PepsiCo “feel confident about being vindicated” by the court.
In the judge’s new order Feb. 27, she stated that PepsiCo argued that the “potential harm to plaintiffs is outweighed by the losses defendants will suffer if defendants are forced to halt the rollout of GATORLYTE.”
PepsiCo lawyers argued that the company spent $18 million on product development and produced 3.6 million bottles of GATORLYTE and shipped at least $1.7 million worth of the product, according to court documents. PepsiCo said it spent another $1.3 million in media purchases related to the product and that it risked losing $3.3 million in aging products depending on the duration of the duration of the injunction.
“While the Court agrees that Defendants’ investments are significant, the court does not find that a temporary prohibitive restraining order will greatly affect these investments. defendants are not, at least for present purposes, facing the loss of their entire product line or an expensive recall,” Judge Alvarez wrote.
“Given the size, reputation and defendants’ vast product lines, the court is unconvinced by defendants’ arguments that it will suffer serious reputational harm and harm to its relationships if prohibited from further rolling out GATORLYTE during the prohibitive period of a Temporary Restraining Order,” the judge wrote.
The Texas Lawbook will continue to monitor developments in this litigation.