The Beverage Wars

A US Federal Court has made a ruling based on a recent US arbitration that Bang Energy must pay rival beverage companies Monster Energy Company (Monster) and Orange Bang Inc (Orange Bang) the sum of $175 million for violating “Bang” trade mark rights. In an unprecedented award in US trade mark litigation to date, Bang Energy must also pay Monster and Orange Bang $9.3 million in legal costs as well as a 5% royalty on future sales of Bang Energy and other Bang-branded products. Although this decision is likely to be appealed by Bang Energy, the high value award serves as a timely reminder to those operating in the food and beverage sector of the need to take steps to protect their IP and to be aware of the risk of infringement by competitor companies. We analyse the decision and its wider implications for food and beverage businesses.

Background

Since 1983, Orange Bang has held trade mark registrations in the US for the word BANG covering Class 32 beverage products. In 2008, Vital Pharmaceuticals Inc (VPX) released its Bang Pre-Workout product which was the first VPX/Bang Energy product marketed and sold under the name “BANG!” Later that year, VPX also obtained a trade mark registration for the mark “BANG” in Class 5. Given the identity of the BANG marks for similar products, and in an effort to avoid litigation, the parties entered into a trade mark co-existence agreement in 2010. In accordance with that agreement, VPX, which subsequently rebranded as ‘Bang Energy’, may only use the “BANG” trade mark to sell dietary supplements and nutritional products, provided they are “creatine-based” and “nutritionally fortified” products. In addition, the agreement permits VPX to market and sell such nutritionally fortified products in certain vitamin and nutritional supplement stores, gyms and health clubs, or in the vitamin and dietary supplement sections only of convenience stores.

Monster and Orange Bang team up

In the years that followed, the success of VPX grew significantly, as did its use of the BANG mark which became more widespread and mainstream. For example, in 2018, it released its BANG Keto Coffee product, a product which does not purport to have any creatine. That chain of events ultimately resulted in Monster and Orange Bang meeting together, and the latter assigned its claims in the litigation to Monster. They decided to jointly collaborate in their approach to holding VPX/Bang Energy to account for its alleged breach of the 2010 co-existence agreement, and for also purporting to make misrepresentations to consumers about the creatine and “super creatine” content of their products. At the same time, VPX/Bang Energy counterclaimed that Monster had wrongfully “weaponised” the 2010 co-existence agreement and sought a declaratory order from the Courts that it did not violate Orange Bang’s trade mark rights.

Arbitration

When the case was sent to arbitration, in a 177 page ruling, the arbitrator found strongly in favour of Monster and Orange Bang. The arbitrator concluded that:

• Bang Energy’s Ready To Drink (RTD) product and other Bang-branded products do not satisfy the “creatine-based” standard required by the 2010 co-existence agreement
• Monster/Orange Bang are entitled to receive a reasonable royalty for the pervasive use of the BANG mark by VPX/Bang Energy from 11 August 2010 to 19 September 2021, and
• VPX/Bang Energy had made pervasive, prominent and omnipotent use of the BANG mark in order to generate astronomical revenues and profits and VPX/Bang Energy did this without having the legal right to make use of the BANG mark

The arbitrator concluded that VPX/Bang Energy was liable to Monster and Orange Bang in the sum of $175 million for disgorgement of profits, ie profits wrongfully obtained, resulting from its trade mark infringement.

Comment

The wide range of equitable remedies considered by the arbitrator in the ruling is worthy of note. For example, the arbitrator was satisfied to grant a permanent injunction restraining Bang Energy from making use of the Bang mark on any current or future product or packaging other than in accordance with the terms of the 2010 co-existence agreement. The arbitrator also ultimately awarded the 5% royalty payment on sales in favour of Monster and Orange Bang in lieu of such a permanent injunction. This principle of damages in lieu of an injunction has arisen in Irish case law on trade marks before also.[1]

The arbitrator acknowledged that Bang Energy had agreed to “some pretty harsh restrictions” in the 2010 co-existence agreement. He was satisfied however, that it did not amount to an unreasonable or an unlawful restraint of trade for Monster and Orange Bang to effectively “team up” and require that Bang Energy honour the agreement and restrictions it had freely entered in to. Despite his acknowledgement of the harshness of those terms, the arbitrator was satisfied that Bang Energy had voluntarily entered into the 2010 co-existence agreement “for its own business purposes” and that it should be required to fulfil the agreement. This provides food for thought for parties entering into co-existence agreements going forward.

For more information, please contact a member of our Intellectual Property team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] See for example, the case of DSG Retail Ltd v PC World Ltd [1998] ETMR 321