Société des Produits Nestlé v. Casa Helvetia

Casa Helvetia, Inc. (defendant) was the authorized distributor in Puerto Rico of Perugina chocolates, a luxury brand produced in Italy. Société des Produits Nestlé, S.A. (Nestle) (plaintiff) owned the Perugina trademark. In 1988, Nestle licensed its affiliate, Nestle Puerto Rico, Inc., to be the exclusive Puerto Rican distributor of Perugina chocolates. Previously, Nestle had licensed Distribuidora Nacional de Alimentos La Universal S.A. (Alimentos) to manufacture and sell chocolates bearing the Perugina mark in Venezuela. The Venezuelan-made products were of lower quality and price than the Italian-made chocolates. The licensing agreement prohibited Alimentos from selling or distributing the Venezuelan chocolates in the United States and from exporting them under the Perugina trademarks outside Venezuela. In 1990, Casa Helvetia began purchasing the Venezuelan-made chocolates through a middleman, importing them to Puerto Rico, and distributing them under the Perugina mark. Nestle and its affiliate, Nestle Puerto Rico, filed suit, alleging that Casa Helvetia’s marketing of the Venezuelan chocolates infringed Nestle’s registered trademark and its affiliate’s right of exclusive distributorship. Nestle argued that Casa Helvetia’s use of the Perugina mark was likely to cause Puerto Rican consumers to believe that the lower-quality Venezuelan chocolates were the same as the Italian ones, which were made, packaged, and distributed under tight controls designed to preserve the quality of the product. Nestle also argued that because the Perugina brand was associated in Puerto Rico with the higher-quality Italian chocolates, the importation of materially different Venezuelan chocolates would erode the integrity of the Perugina trademarks. The district court found that the differences between the chocolates did not warrant injunctive relief in the absence of evidence of actual consumer dissatisfaction. Nestle appealed.