Will Court Support Confusion Claims in Competing Capsules Case?

Capsules Case

A long percolating disagreement recently came to a boil when Nespresso USA filed a complaint in federal court accusing Peet’s Coffee of unfair competition, infringement, and dilution of Nespresso’s trademarks and trade dress in the course of selling a competing line of coffee capsules.

Peet’s line of coffee capsules is marketed as “Compatible with Nespresso Original Line” machines, though the web page and packaging for Peet’s capsules include a non-affiliation statement that reads “*Nespresso is a registered trademark of Société des Produits Nestlé S.A., and is not affiliated with Peet’s Coffee Inc.”  However, Nespresso characterized the non-affiliation statement as a “small, inconspicuous disclaimer,” that lacks the prominence  necessary dispel the impression of an affiliation.  In October 2018, counsel for Nespresso contacted Peet’s to demand that steps be taken to clarify the absence of any affiliation between Peet’s capsules and Nespresso.  According to Nespresso’s complaint, Peet’s response denied any infringement of Nespresso’s marks and trade dress.

In addition to being compatible with Nespresso’s machines, Peet’s capsules have a two-stage cone shape that the complaint describes as confusingly similar to Nespresso’s trade dress in the form of the Original Nespresso Capsule.  As noted in the complaint, Nespresso’s capsules are immediately recognizable to many coffee enthusiasts.  On the other hand, many intellectual property enthusiasts are likely to recognize that some aspects of the Nespresso’s capsule design serve functional purposes and thus cannot be protected as trade dress.

Nespresso points to several interactions between Peet’s official accounts and other users on social media as evidence that Peet’s failed to dispel customers’ confusion, specifically highlighting instances where Peet’s responded to inquiries on Twitter and Facebook that referred to Peet’s products as “Nespresso capsules” or pods without explicitly disclaiming Nespresso’s affiliation.  Nonetheless, Peet’s responses in these interchanges consistently referred to Peet’s products as “Espresso Capsules.”

If it continues to grind along, this case is likely to raise interesting questions as to how clearly affiliation between comparable products needs to be disclaimed in marketing materials, where lines can be drawn between functional elements and protectable brand identifiers, and what practices brands should follow to correct customers’ misperceptions on social media.  Even so, this commentator hopes the matter will cool off before it gets bitter.