author: KRENZLER, District Judge.

text:
    WHITE CONSOLIDATED INDUSTRIES, INC., Plaintiff, v. WHIRLPOOL CORP., Dart & Kraft, Inc., Hobart Corp., Emerson Electric Co., Defendants. MAGIC CHEF, INC., Plaintiff, v. WHIRLPOOL CORP., Dart & Kraft, Inc., Hobart Corp., Emerson Electric Co., Defendants.
    Nos. C85-472, C85-667.
    United States District Court, N.D. Ohio, E.D.
    Aug. 1, 1985.

      James M. Porter, Thomas S. Kilbane, James P. Murphy, Walter J. Rekstis, III, John R. Gall, John E. Lynch, Jr., Stacey D. Ballin, Squire, Sanders & Dempsey, Daniel R. Elliott, Jr., Vice-President — Law White Consol. Industries, Inc., Cleveland, Ohio, for White Consol.
    John K. Train, III, Martin J. Elgison, H. Stephen Harris, Jr., Alston & Bird, Atlanta, Ga., Jason C. Blackford, Mark O’Neill, Weston, Hurd, Fallon, Paisley & Howley, Cleveland, Ohio, for Magic Chef, Inc.
    M. Neal Rains, Eric H. Zagrans, Stephen R. Twiss, Arter & Hadden, Cleveland, Ohio, Jerome A. Hochberg, Ann K. Sullivan, Paul H. Friedman, Arter & Hadden, Washington, D.C., William K. Holmes, Joseph A. Scoville, Tracey T. Larsen, Philip S. Van-DerWeele, Warner, Norcross & Judd, Grand Rapids, Mich., Charles Putnam, Robert I. Frey, Whirlpool Corp., Benton Harbor, Mich., for Whirlpool Corp.
    Donald G. Kempf, Jr., Tefft W. Smith, Thomas D. Yannucci, John T. Whatley, Randall A. Hack, Kirkland & Ellis, Chicago, 111., George F. Karch, Jr., Thompson, Hiñe & Flory, Cleveland, Ohio, for Dart & Kraft, Inc.
    Arthur F. Golden, Paul W. Bartel, Daniel L. Brackett, Davis, Polk & Wardwell, New York City, H. Stephen Madsen, Jonathan E. Thackeray, Baker & Hostetler, Cleveland, Ohio, for Emerson Elec.
   MEMORANDUM AND ORDER VACATING PRELIMINARY INJUNCTION

KRENZLER, District Judge.

On June 28, the Court granted the motions of the plaintiffs in the above-captioned cases for a preliminary injunction. The Court concluded at that time that:

For the divestiture in this case to be curative, Emerson would have to be free to manufacture, distribute, and market the Model 21 under any name not confusingly similar to KitchenAid’s. In addition, Emerson would have to be free to distribute the Model 21 through any means it chose. Finally, Emerson would have to be free to private label the Model 21. The Court finds that these restrictions are sufficiently inhibitive of Emerson’s ability to compete in the market that Emerson will not act as a post-transaction check on Whirlpool and will not, in any way, make up for the loss of Kitche-nAid. Court’s Order of July 3, Conclusion 24.

On July 1, 1985, the defendants filed a motion to vacate the preliminary injunction. Attached to the motion was a proposed amendment to the supply contract, agreed to and signed by both Whirlpool and Emerson, which allows the post-transaction Emerson to: (1) manufacture, distribute and market the Model 21 dishwasher under any name not confusingly similar to Kitche-nAid’s; (2) distribute the Model 21 through any means it chooses; and (3) private label the Model 21. The defendants’ brief in support of its motion argues that the contract amendment constitutes a change in circumstances and grounds for the Court to vacate the preliminary injunction.

The plaintiffs oppose the motion to vacate on two basic grounds. They contend that even under the amended contract, Emerson will not be a viable and/or willing competitor in the dishwasher market and therefore the divestiture is still not curative. In addition, the plaintiffs continue to argue that even a viable and willing Emerson will not cure the anti-competitive effects of the proposed transaction. The plaintiffs also argue that the question of the willingness of Emerson to actively compete, especially under the amended contract, should be saved until there can be more discovery and should be resolved at a trial on the merits.

The Court finds that plaintiffs’ arguments are unpersuasive. From the evidence available to the Court after a lengthy hearing, the Court finds that under the amended supply contract, Emerson is likely to be a willing and viable competitor in the dishwasher market. Its strong independence will give it complete control over its own manufacturing output and distribution and thus will eliminate the anti-competitive concerns raised by the D & K/Whirlpool stock purchase agreement. Accordingly, the Court orders the preliminary injunction of July 3, 1985, vacated.

As in its order of July 3, the Court notes that substantial evidence was presented during the hearing concerning the effect the proposed transaction might have in markets other than dishwashers, disposers, and compactors. While the Court is mindful that this action may have been brought to protect competitive positions in those other markets, they are not relevant to this action. The Court’s analysis is limited to the dishwasher, disposer, and compactor markets with primary focus on the most important of the three, the dishwasher market.

I. The Significance of Emerson’s Viability

Both plaintiffs argue in their briefs that the Court has misconstrued, mischaracter-ized, and misunderstood their statistical argument regarding the attribution of Kitch-enAid’s market share to Whirlpool. They claim that whether or not Emerson is independently viable, all of KitchenAid’s market share must be assigned to Whirlpool, not Emerson, when the transaction is complete. The fact that the plaintiffs may not consider Emerson’s viability to be relevant to the question of the proper post-acquisition attribution of KitchenAid’s manufactured units market share does not make it irrelevant.

The Court finds Emerson’s independent viability to be the key to the proper post-acquisition attribution of KitchenAid’s manufactured units market share. This conclusion seems the only one to logically flow from the plaintiffs’ own argument.

Magic Chef’s brief in opposition to the motion to vacate maintains that, “... KitchenAid’s market share must be attributed to Whirlpool because the supply contract would place that portion of Emerson’s production capacity under Whirlpool’s control . . . .” Magic Chef Brief, p. 4. Similarly, White’s brief argues:

Whether Emerson manufactures the KitchenAid branded dishwashers for Whirlpool or Whirlpool makes them for itself makes no difference for purposes of analyzing the competitive forces in the market — for purposes of this case, to treat Emerson as an independent manufacturer of the 7% KitchenAid dishwasher market share without recognizing the entire share constituted Whirlpool’s requirements is the triumph of form over substance____ That is the economic reality of the situation and it is pure fantasy to count Whirlpool’s KitchenAid market share as part of the production market share of Emerson. White Brief, pp. 4-5 (emphasis in original) (footnote omitted).

The plaintiffs insist that if Whirlpool absolutely controls some aspect of Emerson’s production, the market share represented by those units must be attributed to Whirlpool. With that premise, the Court agrees. But the inquiry does not end there. The question then becomes, does Whirlpool, in fact, absolutely control any or all of Emerson’s production.

In its previous order, the Court found that certain restrictions placed on Emerson by the supply contract so limited its independence that it might never become a viable player in the dishwasher market. This lack of independence fueled the Court’s finding that Emerson would not effectively control its own production. With the limitations in place, Emerson would be so dependent upon the requirements demands of Whirlpool that Whirlpool would have control over much of Emerson’s dishwasher production. Thus, with the supply contract restrictions in place, the Court accepted the plaintiffs’ market share attribution argument.

Under the amended contract, the restrictions have been eliminated and Emerson will be able to act as an independent force in the market. The plaintiffs insist that Emerson’s independence and viability are irrelevant, but this claim ignores the basic premise of the attribution argument: that attribution should take place when one firm controls another’s production. The Court finds, based on the evidence before it, that under the amended supply contract, Whirlpool would not have the control over Emerson’s production which would justify attribution of KitchenAid’s market share to Whirlpool rather than Emerson.

The amended contract affords Emerson the ability to seriously compete in the dishwasher market, making the supply contract less economically compelling for Emerson. While the supply contract will provide Emerson substantial profits during its penden-cy, an independent Emerson will be in the position to determine whether or not the supply contract is the most profitable deployment of its resources. Without substantial independence, Emerson would be forced to be content with the profits from the supply contract. Yet, the independence and viability which the amended contract provides Emerson also makes realistic its option to abandon the supply contract, on one year’s notice, in favor of other, more profitable endeavors.

The plaintiffs have chosen to ignore the “economic reality” that Emerson is an impressive company with a long history of successful private labeling enterprises in a range of product markets. The Whirlpool/Emerson stock purchase agreement and the amended supply contract provide Emerson with virtually all that was once KitchenAid, leaving to Whirlpool only the KitchenAid name and the garbage disposer plant.

Under the amended supply agreement Emerson will be in complete control of its own production, with the option to maintain the supply agreement with Whirlpool or turn elsewhere with the Model 21. Emerson will be the company selling “the best dishwasher in the world” to the highest bidder, competing with other private label suppliers. At the end of this transaction, Whirlpool will 'simply become another of Emerson’s private label customers in another one of its many product markets.

Whether or not the plaintiffs chose to accept it, their attribution argument hinges upon whether or not Whirlpool will control Emerson’s production. The Court finds that the independence afforded Emerson by the amended supply contract, independence not afforded under the original supply contract, will free Emerson from any production control by Whirlpool. Accordingly, under the changed circumstances brought about by the amended supply contract, the Court finds that the attribution of post-transaction KitchenAid market share to Whirlpool would be inappropriate. Kitche-nAid’s manufactured units market share should be attributed to Emerson, which will own the KitchenAid manufacturing plants and will control its own production destiny.

Given the attribution of KitchenAid’s market share to Emerson, the Court finds that the pre- and post-transaction manufactured units market share four-firm concentrations and HHIs will be the same. Therefore, the Court finds that a statistical analysis of the proposed transaction in no way suggests the existence of anti-competitive agreements.

II. The Likelihood of Emerson’s Viability

While addressed in the Court’s previous order and above, the Court is constrained to comment further on its view of the evidence regarding Emerson’s viability in the post-transaction dishwasher market. The plaintiffs argue strenuously in their briefs on the motion to vacate that if Emerson’s viability is significant, then the evidence either: (1) demonstrates that Emerson will not be viable, or (2) is inconclusive, and thus the preliminary injunction should stand until a trial on the merits.

The Court disagrees with both of plaintiffs’ contentions. White’s brief on the motion includes sections entitled “there is no evidentiary basis in the record to support Emerson’s likelihood of success in selling the KD-21” and “the hearing record will not support a conclusion that Emerson will be able to become a substantial participant in the dishwasher market even with the three restrictions lifted.” White’s Brief, pp. 6 and 20. Magic Chef’s brief contains similar sections, all arguing that Emerson will be unwilling and/or unable to meaningfully participate in the post-transaction market.

The defendants argue in their brief in opposition that:

Now, as a result of the amendments prompted by the Court’s Opinion, Emerson — a proven successful private label-ler — will be able to private label an even better product, the “best dishwasher in the world.” Defendants’ Brief, pp. 6-7.

and that:

The record amply demonstrates that Emerson is an experienced and capable manufacturing company and that it has every intention of vigorously competing in the manufacture and sale of dishwashers and compactors. Defendants’ Brief, p. 8.

On the evidence before the Court at this time, the Court adopts these allegations contained in the defendants’ brief as its own findings.

The plaintiffs argue that the Court lacks evidence about how the Model 21 will be marketed, who it will be sold to, and a wide range of other matters, and that without this information, the injunction must stand. This argument seems to reverse the burdens of the parties.

The defendants have demonstrated that Emerson is ready to proceed full steam ahead to manufacture and market dishwashers. While Emerson maintained that it would be able to do just that under the original supply contract, the Court found that the supply contract restrictions made Emerson’s independence, and thus its success, so suspect that an injunction was necessary.

Emerson has been freed of the restrictions under the amended supply contract. The Court has found, and maintains, that the evidence before it demonstrates that Emerson has historically been successful in situations similar to its proposed entrance into the dishwasher business, and that it is likely to be successful again.

The plaintiffs have offered little evidence which effectively refutes Emerson’s contention that it intends to proceed vigorously. Nor have they produced convincing evidence that shows that an unhampered Emerson would be unable to do so. The Court concludes that the post-transaction Emerson is likely to be an even more important component of the dishwasher market than was KitchenAid in the pre-transaction market.

It is important to recognize that Emerson is not entering the market faced with traditional entry barriers. Along with its history of successful private labelling, Emerson will begin with a fully tooled plant, ready to produce a state-of-the-art machine. In addition, Emerson will have a guaranteed profits contract to supply dishwashers to Whirlpool for at least five years, which it can maintain or abandon depending upon its other successes. Emerson has a strong relationship with potential customers to which it already sells private label goods, and Emerson will be a new private labeller in the industry, replacing KitchenAid, a manufacturer unwilling to private label.

In addition, Emerson is free to expand, using its expertise, industry contacts, and other resources. If it chooses, it may develop new dishwashers to replace the Model 21 when it becomes obsolete. Emerson is also free to enter other product markets, using In-Sink-Erator, or whatever name it develops for its dishwashers. The fact is that the independent, viable Emerson created by this transaction may be able to become, if it chooses, a substantial player in more than just the dishwasher market; it may be able to take on a key role in other white goods markets, too. A KitchenAid with unenthusiastic ownership simply can not compare to the post-transaction Emerson.

The Court recognizes that its findings are substantially based upon the evidence provided by Emerson’s witnesses at the hearing. The Court found Mr. Seals and Mr. Adorjan to be highly credible and gave substantial weight to their testimony. If it were to be determined later that these witnesses were either grossly misinformed or intentionally deceptive in their testimony, it is the Court which would have been deceived into accepting their positive projections. But the sworn testimony of these men convinced this Court that Emerson plans to do all that it can to compete successfully in the business, and convinced this Court that when left to its own devices, it will do just that.

Accordingly, the Court finds that the transaction, when taken as a whole, is not substantially likely to lessen competition. Given that finding, there is no likelihood that the plaintiffs will succeed on the merits and this Court must vacate its previous injunction.

III. Other Arguments

The plaintiffs also argue that there are less anti-competitive alternatives to the D & K/Whirlpool stock purchase agreement. While this may or may not be true, it is not this Court’s duty to permit only the most competitive agreement imaginable. This Court may only block proposed transactions which the effect of which may be to substantially lessen competition. 15 U.S.C. § 18. Since this Court has determined that the proposed transaction, when it includes the amendments to the supply contract, is not likely to substantially lessen competition, it must deny the plaintiffs’ request for injunctive relief even if other, more competitive transactions are conceivable.

Finally, Magic Chef argues that the amendments to the supply contract should only be considered at trial and that more discovery should be allowed to inquire about the circumstances surrounding the contract amendments. No authority has been cited for the proposition that the Court should ignore this new and obviously relevant evidence. Clearly the contract amendments go to the heart of the Court’s concerns in this case and can not be ignored. While further exploration of the circumstances surrounding the amendments remains open to the plaintiffs if there is a trial on the merits, the evidence is before the Court at this time and must be considered.

IV. Conclusion

Given the amended supply contract, the Court finds that KitchenAid’s manufactured units market share should be attributed to Emerson, and that a statistical analysis would not lead to the conclusion that the proposed transaction is at all likely to substantially lessen competition in the dishwasher market. In addition, the Court finds that the amended supply contract gives Emerson the independence to be viable in the dishwasher market and that Emerson, with others, will be able to act as a check on the market leaders.

Accordingly, the Court finds that the plaintiffs have not demonstrated a substantial likelihood of success of proving an antitrust violation, have not shown that the transaction would cause irreparable injury, and have not shown that the transaction would be detrimental to the public interest. Accordingly, the preliminary injunction shall be vacated.

V. Time to Appeal

Also pending before the Court is the plaintiffs’ contingent motion for an injunction pending appeal. In the event that the Court were to grant the defendants’ motion to vacate the preliminary injunction, as the Court intends to do, the plaintiffs sought an injunction during the pendency of their appeal to that order. In the alternative, the plaintiffs sought a 10-day restraining order, staying the closing of the transaction until the plaintiffs had an opportunity to seek a longer stay from the United States Court of Appeals for the Sixth Circuit.

The defendants argue, in opposition to the motion, that if the closing should not be enjoined, then it is improper for the trial court to order a stay pending appeal. As a concession, the defendants agree to voluntarily stay the closing of the transaction for two days from the order vacating the preliminary injunction to allow the plaintiffs an opportunity to seek a further stay from the Court of Appeals.

The Court has determined that, with the amended supply contract, there is no reason to enjoin the proposed transaction. Accordingly, the Court is unwilling to grant a preliminary injunction during the pendency of the plaintiffs’ appeal. Still, even the defendants have recognized that it would be fair to provide the plaintiffs some time to seek a stay from the Sixth Circuit. In order to provide the plaintiffs time to prepare and seek their request for a stay from the Sixth Circuit, this order of the Court vacating the preliminary injunction of July 3, 1985, shall not take effect until Friday, August 9, 1985. At that point, the defendants’ stipulated stay of two business days from the time of the vacation of the injunction shall take effect. Thus, when this order vacating the injunction takes effect on August 9, 1985, the plaintiffs shall have until Tuesday, August 13, to seek a stay from the Sixth Circuit. If the Sixth Circuit has not stayed the transaction by Tuesday, August 13, 1985, at 5:00 p.m., the transaction may close.

IT IS SO ORDERED.

      . On July 3, 612 F.Supp. 1009, the Court issued a revised memorandum of opinion with minor alterations of the June 28 order. The Court’s substantive conclusions in both opinions were identical, and all issues raised by the motion to vacate and the oppositions thereto were treated identically in the original and revised memorandum. Throughout this opinion, the Court will refer to the more recent July 3 memorandum, but all conclusions drawn herein are equally applicable to the original memorandum filed on June 28.

      . The document labeled “AMENDMENT" attached to the defendants’ motion states that pri- or to the execution of the supply contract, that contract will be changed to reflect the terms agreed to in the amendment of June 29, 1985. Since in this order this Court is relying on the proposed supply contract changes reflected in the "amendment," the Court will proceed as if the proposed alterations were already incorporated in the supply contract and, therefore, as if an “amended supply contract” already existed as an integrated document. There must be no doubt that if the supply contract is ever executed, it must be in the form of an amended supply contract which completely and accurately incorporates all of the terms of the amendment of June 29, 1985. The execution of a supply contract which did not do so would be anti-competitive and illegal.


source: Caselaw Access Project

author: FRYE, District Judge:

license: Public Domain

text:
    UNION CARBIDE CORPORATION, Plaintiff, v. FRED MEYER, INC. and BASF Wyandotte Corporation, Defendants.
    Civ. No. 85-546-FR.
    United States District Court, D. Oregon.
    Aug. 9, 1985.

      Jere M. Webb, Stoel, Rives, Boley, Fraser & Wyse, Portland, Or., Thomas A. Smart, Kaye, Scholer, Fierman, Hays & Handler, New York City, for defendants.
    J. Pierre Kolisch, Kolisch, Hartwell & Dickinson, Portland, Or., Kenneth R. Umans, Julie A. Lauber, Nims, Howes, Col-lison & Isner, New York City, John M. Bergin, Mary Ann Alford, Union Carbide Corp., Danbury, Conn., for plaintiff.
   OPINION AND ORDER

FRYE, District Judge:

Plaintiff Union Carbide Corporation (Union Carbide) brings this action for a preliminary injunction under the Lanham Act of 1946, 15 U.S.C. § 1125(a) and certain state statutes which preclude false designations or representations of a product’s origin. Union Carbide claims defendants are violating section 1125(a) of the Lanham Act of 1946 by infringing its trademark and trade dress in the sale of antifreeze. Union Carbide seeks to enjoin defendants Fred Meyer Corporation (Fred Meyer) and BASF Wyan-dotte Corporation (Wyandotte) from continuing to market antifreeze in yellow, F-style, one-gallon jugs, claiming that the design of the jug and its yellow color constitute a protectable trade dress. for its well-known, national brand of antifreeze, PRESTONE II.

Union Carbide claims consumers are confused by antifreeze jugs that duplicate the shape and color of PRESTONE II. As a result, consumers buy “other” brands, assuming they are either PRESTONE II or other antifreeze products manufactured, sponsored, or approved by Union Carbide. Union Carbide contends that defendants’ intentional use of the yellow, F-style, one-gallon jugs in connection with the sale, offering for sale, distribution, and advertising of antifreeze products is an attempt to trade upon Union Carbide’s good will and brand loyalty, thereby diverting its business and constituting a false designation or representation under 15 U.S.C. § 1125(a).

Defendants Fred Meyer and Wyandotte contend Union Carbide has no right to exclusive use of yellow, F-style, one-gallon jugs for packaging antifreeze. Defendants claim the jug design is not protectable as a trademark or trade dress because it is a functional, standard design with widespread, long-term use in the antifreeze industry. Defendants contend that plaintiffs claim is simply a demand for exclusive use of the color yellow and that the color yellow, or any other color, standing alone, is not protectable as a trademark. In addition, defendants assert that the combination of the color yellow and a nondis-tinctive, functional jug design are not protected by the law, because the jug labels sufficiently distinguish the products to avoid consumer confusion.

BACKGROUND

Since 1927, Union Carbide has sold antifreeze under the trademark PRESTONE. In 1972, Union Carbide designed a plastic, F-style, one-gallon, yellow container for its PRESTONE II antifreeze. Since then Union Carbide has continuously advertised and sold PRESTONE II in this container. Although unique at the time, the P-style, one-gallon jug is now standard in the antifreeze industry. Different companies use it with a variety of colors to package antifreeze.

In 1973, Morrison Oil of Portland, Oregon began to sell antifreeze in yellow, F-style, one-gallon containers. From 1975 until 1980, at least four other companies have used these containers. At present, at least eleven companies, in addition to Union Carbide, use the yellow, F-style, one-gallon jug to package antifreeze. They constitute only a small portion, 2-3%, of the total antifreeze market, however, because PRESTONE II dominates the market and some companies use different colors with their F-style jugs.

Union Carbide also sells packaged antifreeze to other companies, who resell it to consumers under their own private labels. This is a common practice known as private labelling. In 1983, Union Carbide allowed Pep Boys, a retail chain of automobile accessory stores, to sell Union Carbide’s antifreeze under a Pep Boys private label in a yellow, F-style, one-gallon jug. No license was required.

Defendant Fred Meyer is a chain of retail stores located in Oregon and other western states. For more than 50 years it has marketed private label products. During the mid-1970’s it sold antifreeze supplied by Morrison Oil in yellow, F-style, one-gallon jugs. For several years prior to 1982, Fred Meyer purchased antifreeze in a white, F-style, one-gallon container from Union Carbide, and sold it under the Fred Meyer label. In June, 1982, Fred Meyer began to purchase antifreeze from Wyandotte in yellow, F-style, one-gallon jugs and to sell it under the Fred Meyer label.

Defendant Wyandotte manufactures and sells private label antifreeze to a variety of nationwide clients, including Fred Meyer. Wyandotte is the largest supplier of private label antifreeze in the United States. Wyandotte’s clients choose the color of the container and the label design. For those clients whose volume of purchases does not reach the required minimum of 100,000 gallons, Wyandotte supplies a control brand, XPA, packaged in a yellow, F-style, one-gallon container.

In 1984, Union Carbide commissioned a study to determine whether its yellow, F-style, one-gallon jugs had acquired secondary meaning among consumers. With advice from legal counsel, it began to require retailers to obtain a license in order to sell Union Carbide’s antifreeze under a private label in yellow, F-style, one-gallon containers. Two licensing agreements, one with Pep Boys, had been executed at the time of the preliminary injunction hearing.

On November 13, 1984, Union Carbide notified Wyandotte that it claimed rights in yellow, F-style, one-gallon antifreeze containers in substantially the same shape as Union Carbide’s PRESTONE II container, and that it objected to Wyandotte’s using and supplying these cqntainers. (See page 1033 infra for portion of letter of November 13, 1984). Wyandotte continued to sell antifreeze in these jugs. On March 25, 1985, Union Carbide applied to register the yellow, F-style, one-gallon jug with the Federal Patent and Trademark Office. On March 26, 1985, Union Carbide filed its complaint in this case, seeking to enjoin sales of antifreeze in yellow, F-style, one-gallon jugs by Fred Meyer and Wyandotte. A hearing on the motion for a preliminary injunction was held on April 18, 19, and 22, 1985.

STANDARD FOR A PRELIMINARY INJUNCTION

In National Center for Immigration Rights, Inc. v. INS, 743 F.2d 1365 (9th Cir.1984), the Ninth Circuit restated the standard for granting a preliminary injunction:

To obtain a preliminary injunction the moving party must demonstrate either (1) probable success on the merits and the possibility of irreparable injury, or (2) that serious questions are raised and the balance of hardships sharply favors the moving party. Beltran v. Meyers, 677 F.2d 1317,1320 (9th Cir.1982). These are not separate tests, but are at the ends of the continuum; the greater the relative hardship to the moving party, the less probability of success must be shown, (citation omitted). 743 F.2d at 1369.

PROBABILITY OF SUCCESS ON THE MERITS

In order to prevail on its claim of trade dress and trademark infringement, Union Carbide must first prove that the yellow, F-style, one-gallon container is protectable as a trademark. To do so, it must demonstrate that this trade dress is nonfunctional and has acquired secondary meaning. 1 J. McCarthy, Trademarks and Unfair Competition, §§ 7:28, 8:2 (2d ed. 1984). If Union Carbide proves that its trade dress is nonfunctional and has acquired secondary meaning, it must then show that consumers are likely to confuse PRESTONE II with other brands of antifreeze packaged in the same yellow, F-style, one-gallon container. Id., § 2:2.

To prevail on a claim of unfair competition, Union Carbide must show that its trade dress is non-functional and has acquired secondary meaning. Then it must make a strong showing that there is a likelihood of confusion when an ordinary purchaser views not just the yellow, F-style, one-gallon containers claimed as trade dress, but views the product’s entire packaging, including the label. Id., §§ 2:2, 8:3.

Trade Dress and Trademark Infringement Claim

Union Carbide recognizes that neither color nor shape alone constitutes a protect-able trademark or trade dress. However, Union Carbide maintains that the combination of color and an “ordinary, but specific” shape may be a protectable trademark or trade dress when there is evidence of secondary meaning. Union Carbide concedes it is easier to acquire trademark significance with a distinctive shape or with the combination of a distinctive shape and distinctive color than to acquire trademark significance with the combination of an ordinary shape and a primary color like the yellow, F-style, one-gallon jug. Union Carbide acknowledges that the use of one color as a background on a package is usually rejected as having trademark significance. 1 J. McCarthy, Trademarks and Unfair Competition, § 7:17 (2d ed. 1984).

Union Carbide urges, however, that the proper legal analysis is to consider the claimed mark as a whole, rather than as separate elements of color and design. Union Carbide cites Ex Parte Pillsbury Flour Mills Company, 23 U.S.P.Q. 168 (Commissioner of Patents 1934) and Application of Colonial Stores, Inc., 394 F.2d 549 (C.C.P. A.1968), among other cases, as precedent for this position. However, both of these cases specifically required an analysis of the separate words as well as the words combined to form one trade name, in order to decide whether the trade name could be registered. No authority is cited that allows this court to overlook the separate elements of color and design in order to reach its conclusion. Thus the court will analyze color and shape as separate elements and as combined elements to determine if Union Carbide has a protectable trade dress for its PRESTONE II.

1. Shape

The court finds that the F-style jug design is functional and cannot be protected as a matter of law, even if there is evidence of secondary meaning. 1 J. JcCarthy, Trademarks and Unfair Competition, §§ 8:6, 15:1C (2d ed. 1984). Ample evidence in the record demonstrates that antifreeze is almost universally marketed in containers of this design. Its shape is conducive to stacking for shipping and displaying and for consumer use and storage. The container is economical to produce. The F-style design affects “the purpose, action or performance, or the facility or economy of processing, handling, or using the product” and meets the test of whether an item is functional. Intricate Metal Products, Inc. v. Schneider, 324 F.2d 555, 562 (9th Cir.1963). Even if the court were to find the jug to be distinctive, the fact that it is also functional precludes a finding of protectable trade dress. While it is true that the jug was distinctive when Union Carbide first designed it, an inequitable result would follow if the court were to protect it, in that “the first user of a container such as the now-standard soup can, potato chip bag, or cracker box would be able to preclude competitors from using these highly functional containers.” Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366, 378 (1st Cir.1980).

The final problem with respect to Union Carbide’s claim for protection of shape is its stated lack of objection to Wyandotte’s use of the F-style jug. In the letter of November 13, 1984, to Wyandotte, Union Carbide’s counsel stated:

We believe that our unique PRESTONE II brand yellow containers have developed a secondary meaning and hence we claim a proprietary interest in this trade dress. While we have no objection to the sale of antifreeze in similar shaped containers to PRESTONE II brand containers, we object to the use of antifreeze containers in substantially the same shape as ours predominately utilizing the color yellow. (Emphasis added).

2. Color

While Union Carbide has no protect-able interest in the F-style design, the question remains whether the color yellow is protectable. The general rule is that color cannot be appropriated as a trademark, unless it is part of a distinctive design. 1 J. McCarthy, Trademarks and Unfair Competition, § 7:16 (2d ed. 1984). Courts usually reject a mere background color as distinctive. Id., § 7:17.

A major reason for rejecting trademark protection for color is that there are only seven major colors. In Campbell Soup Co. v. Armour and Co., 175 F.2d 795, 798 (3d Cir.1949), cert, denied 338 U.S. 847, 70 S.Ct. 88, 94 L.Ed.2d 518 (1949), the court rejected plaintiff’s trademark claims to the colors red and white in a label. It stated:

If [plaintiff] may thus monopolize red in all of its shades the next manufacturer may monopolize orange in all its shades and the next yellow in the same way. Obviously, the list of colors will soon run out.

A recent case, In re Owens-Coming Fiberglas Corp., 221 U.S.P.Q. 1195 (1984), holds that this “color depletion theory” may be used to reject trademark protection for color where a competitive need for the color exists.

This court finds that the antifreeze packaging industry has a competitive need for the color yellow. This finding is based on the fact that yellow is one of the few primary colors, and that consumers respond favorably to yellow. See, McNeal, Color and Its Impact on Consumer Packaging, 8 The Business Review, University of Houston, 3, 12 (1961). There is also evidence in the record that some antifreeze sellers choose a yellow jug because it forms the most attractive background for their labels. The court cannot find, as Union Carbide urges, that the only reason Fred Meyer and Wyandotte and third parties selected yellow is to pass off their product as PRESTONE. The court specifically finds that Fred Meyer and Wyandotte have not acted with such intent here.

Union Carbide asserts that evidence of secondary meaning strengthens its claim for protection of its trade dress elements of shape and color. However, as in the Owens-Coming Fiberglas case, the court finds that a recognized competitive need for the color yellow in the industry precludes a consideration of secondary meaning. Only when no competitive need exists may evidence of secondary meaning be offered to demonstrate that color functions as a trademark and is therefore entitled to protection. Generally, other courts have not enjoined the use of a single background color even when it is recognized as a part of trade dress or trademark. Instead, certain distinctive combinations of colors or color and other elements which result in deceptively similar products are prohibited. See, Eastman Kodak Co. v. Royal-Pioneer Paper Mfg. Co., 197 F.Supp. 132 (E.D. Penn.1961), Eastman Kodak Co. v. Fotomat Corporation, 317 F.Supp. 304 (N.D. Ga.1969), app. dismissed, 441 F.2d 1079 (5th Cir.1971), Southwestern Bell Telephone Co. v. Nationwide Independent Directory Service, Inc., 371 F.Supp. 900 (W.D.Arkansas 1974), and Canon U.S.A., Inc. v. Saber Sales Corp., 220 U.S.P.Q. 1003 (E.D.N.Y.1983). Here, no other distinctive elements are used with the jug’s yellow background except the labels. Union Carbide does not claim an infringement of its labels.

3. The Combination of Shape and Col- or

Union Carbide contends that the combination of color and design may be a pro-tectable trademark and trade dress, especially when there is evidence of secondary meaning. Defendants Fred Meyer and Wyandotte state that neither the design nor the color is protectable as trade dress; that Union Carbide’s survey has failed to establish secondary meaning; and that in any event there is no likelihood that consumers will confuse their antifreeze brands with PRESTONE II.

To prevail on its claims, Union Carbide must demonstrate that the combination of the color yellow and the F-style design is nonfunctional and has acquired secondary meaning. 1 J. McCarthy, Trademarks and Unfair Competition, §§ 7:28, 8:2 (2d ed. 1984). This court finds that this particular combination of otherwise unpro-tectable elements cannot be deemed pro-tectable trade dress. This is so even if there is evidence of secondary meaning. In this case the court has concluded that evidence of secondary meaning is irrelevant with respect to color, because a competitive need for yellow exists in the industry. In re Owens-Coming Fiberglas Corp., supra. By the same reasoning, the court finds that secondary meaning with respect to the design of the container cannot be considered, because it is functional and as a matter of law may not be protected. 1 J. McCarthy, Trademarks and Unfair Competition, §§ 8:6, 15:1C (2d ed. 1984). The same rule applies to the combination of a color and a functional design in that “... functional features, ... because of other policy considerations, are never legally protected, no matter how "much evidence of secondary meaning is presented.” Id., § 15:1C. The court rejects Union Carbide’s assertion that the whole is greater than the sum of the parts when secondary meaning is injected into combinations of functional components of trade dress.

Because Union Carbide’s trade dress for its PRESTONE II is unprotectable, the court need not consider the issue of whether consumers are likely to confuse it with the trade dress of the defendants. In conclusion, the court finds that Union Carbide has not shown it is likely to succeed in its claim of trade dress and trademark infringement.

Unfair Competition Claim

The test of unfair competition in the use of similar packaging is the likelihood that consumers will confuse one product with another. To decide this claim, the court must look at factors beyond the F-style design and color yellow, such as label-ling. 1 J. McCarthy, Trademarks and Unfair Competition, §§ 2:2, 8:3 (2d ed. 1984). Here, the court looks to the total effect of defendants’ package on the eye and mind of the ordinary purchaser to determine if confusion is likely. Fabrica Incorporated v. El Dorada Corporation, 697 F.2d 890, 894 (9th Cir.1983).

The court finds that the ordinary purchaser is not likely to confuse Union Carbide’s antifreeze with the antifreeze of Wyandotte and Fred Meyer. The labels on these antifreeze containers are substantially dissimilar. The labels form a major part of the surface area of the one-gallon jugs and employ entirely different design and/or color schemes. No words similar to “PRESTONE II” appear. Different type size and letter colors are used. Union Carbide has failed to produce credible evidence that ordinary consumers are confusing, or are likely to confuse, antifreeze containers bearing labels with these substantial differences. While the possibility of confusion almost always exists, the test is likelihood of confusion, and it has not been demonstrated.

For purposes of a preliminary injunction, the court finds that Union Carbide has failed to show a likelihood of success at trial on the issue of consumer confusion.

State Law

Under ORS 647.107, the court finds no likelihood of injury to Union Car-hide’s business reputation if others use the yellow, F-style jug and finds no distinctive mark to be diluted. In light of this ruling, there is no ground for injunctive relief under ORS 646.608 and ORS 647.095.

IRREPARABLE INJURY

Union Carbide must show it will suffer irreparable injury pending a full trial on the merits in order to prevail on the motion for a preliminary injunction. The equitable remedy of a preliminary injunction cannot be granted unless the remedy at law is inadequate. Here, Union Carbide must demonstrate that money damages are not adequate compensation for the injury it claims it will endure without a preliminary injunction while awaiting trial.

The general rule is, where plaintiff makes a strong showing of likely confusion, irreparable injury follows as a matter of course. 1 J. McCarthy, Trademarks and Unfair Competition, § 30:18 (2d ed. 1984). Union Carbide has not shown a likelihood of consumer confusion in purchases of antifreeze. The court finds that irreparable injury cannot occur in these circumstances. No loss of reputation, trade, or good will, which cannot adequately be compensated with money damages, takes place in the absence of consumer confusion.

The court has considered Fred Meyer’s and Wyandotte’s allegations of laches and detrimental reliance with respect to Union Carbide’s pursuit of its claimed proprietary rights in antifreeze container style and col- or. In light of the court’s finding that consumer confusion is unlikely, these issues need not be addressed for purposes of a preliminary injunction.

IT IS ORDERED that Union Carbide’s motion for a preliminary injunction is DENIED.

      . Union Carbide cites the pharmaceutical drug color cases which recognize background color as a part of trade dress or trademark. However, medicine requires stronger protection than other products because confusion of source or product can have disastrous consequences.

      . Even if the court were to consider the issue related to secondary meaning, Union Carbide has failed to prove that the public associates the yellow, F-style jug with a single source of antifreeze. First, Union Carbide’s PRESTONE II advertising campaign has not stressed the color and shape of the antifreeze jug so as to support an inference of secondary meaning. Courts have held this absence critical in finding a mark not distinctive. See, Mennen Co. v. Gillette Co., 565 F.Supp. 648, 653 (S.D.N.Y.1983), aff'd, 742 F.2d 1437 (2d Cir.1984); In re Bell Electric Co., 192 U.S.P.Q. 395, 399 (T.T.A.B.1976); 1 J. McCarthy, Trademarks and Unfair Competition, § 7:8B (2d ed. 1984). Second, the survey conducted by Union Carbide is flawed in at least the following aspects: (1) the respondents selected to participate in the survey were biased initially toward antifreeze containers because the screening questionnaire did not contain other liquid products whose containers resembled antifreeze containers; (2) the survey does not attempt to account for respondents’ possible use of the term “Prestone” synonymously with antifreeze, which may unfairly have skewed the results in Union Carbide’s favor; (3) guessing by respondents was not controlled since respondents were not told not to guess whose container they were viewing during the survey. See, Zippo Manufacturing Co. v. Rogers Imports, 216 F.Supp. 670, 687 (S.D.N.Y.1963). (Dr. Sorenson specifically instructed respondents not to guess, or to be "certain,” in order to minimize the factor of respondent guessing.)