Legal Battles in a Bowl of Milk
Who would have thought that the most important meal of the day could turn into such a debate over economic regulation and ownership rights? The expansion of the cereal café market has created an intellectual property war over trademarks and patents, and the ability of one company to control the market.
Upon entering Cereality Cereal Bar & Café, one is immediately transported back to a simpler time, when the only question is what cereal to eat for breakfast. The walls of the café are covered in cupboards filled with colorful boxes of cereal from the traditional oat to the newest craze, from the healthy bran to the sugary corn delights. A poster board spotlights the Cereality Signature Blends such as “Three’s A Charm”i or “Frost Bites,”ii as well as the option to design your own combination from over thirty cereals, an assortment of fruit, nuts, granola, and candy toppings, and one of seven milk options. Pajama clad Cereologists ask “What’s in your bowl?” and portion heaps of cereal and toppings into Chinese-food takeout containers. To protect the uniqueness of this experience, co-founders David Roth and Rick Bacher applied for, and were issued trademarks for the name Cereality,iii for slogans used on signs and advertisements such as “Cereality Cereal Bar & Café,”iv and “What’s in Your Bowl?”v as well as for the titles of the Signature Blends.vi Additionally, Cereality has applied for several business method patents for the processes utilized by Cereality ranging from the in-store cereal-storage methods to the process of selecting and mixing the cereals and toppings.
Cereality has taken a tough stance against “copycat” cereal cafes such as Cereology in Iowa, the Cereal Bowl in Miami, and A Cereal Joint in Gainesville, FL, sending warning letters against the use of similar-sounding café names and slogans.vii Roth has been quoted as saying that “We’re happy to see competitors show up to serve cereal away from home,” as long as they do not imitate Cereality’s slogans or serving buckets.viii In March 2006, Cereality sued Cereals LLC, an Ohio company which operated Cerealicious, claiming that Cerealicious had infringed on Cereality’s trademarks in violation of Sections 32 and 43(a) of the Lanham Act,ix and had engaged in unfair competition under Ohio State law.x The suit was settled in August 2006, and Cereality hailed the settlement as proof that “the trademark protection system in this country works.”xi Roth explained that “This lawsuit should also send a signal to any company that bends the rules or takes short-cuts, especially when it comes to the franchise process . . . We are prepared to take this kind of legal action again should the need arise.”xii
Cereality currently has three full-service cafes in Pennsylvania and Arizona, all of which are on or near college campuses.xiii Ironically, the group that has taken the strongest stance against Cereality and its perceived strong arming of competitor cereal cafes is Cereality’s target market—college students. A group from the University of Florida launched a “Cereal Solidarity” campaign in September 2005, criticizing Cereality for engaging in “patent bullying—using lawyers and exclusive rights on common ideas to beat smaller innovators and entrepreneurs into submission.”xiv The group takes a strong stance against business method patents generally, as a legal mechanism which stifles innovations which in turn means “less competition, and less entrepreneurship.”xv The group suggests that Cereality should not be permitted to “claim an exclusive right on mundane ideas that any eight-year-old could think of.”xvi
In order to obtain a business method patent, an applicant must prove a need for a patent to defend novelty in the business process, without overly inhibiting competition or innovation.xvii Cereality’s patents have yet to be ruled on by the U.S. Trademark and Patent Office, and will likely not be granted because of the lack of innovation in the business process. The Supreme Court in Funk Bros. Seed Co. v. Kalo Inoculant Co. ruled that although combining various soils was a new and useful agricultural technique, the process lacked invention so as to warrant a patent.xviii Instead of focusing on current competitors and how best to monopolize the market, Cereality should focus on improving its products and on advancing the cereal café industry. The patent process should be used to defend true discoveries and business processes which are so unique as to warrant protection from copycats, not to stifle creativity and innovation. Cereality has become far too comfortable milking its trademarks and patent applications for all they are worth.
i General Mills Cocoa Puffs and Nature’s Path Panda Puffs with Cereality Charms and chocolate chips. See Cereality, All Day Catering Menu, http://www.cereality.com/press/ONLINE_Catering0906.pdf (last visited Apr. 2, 2008).
ii Kellogg’s Frosted Mini Wheats and Kellogg’s Frosted Flakes with malted milk balls and coconut. Id.
iii U.S. Reg. No. 2,836,818 (registered Apr. 27, 2004).
iv U.S. Reg. No. 2,961,861 (registered June 14, 2005).
v U.S. Reg. No. 2,951,202 (registered Mar. 17, 2006).
vi Complaint at 9, Cereality Corp., Inc., v. Cereals, LLC, 2:06-cv-00202 (GLF) (S.D. Ohio Mar. 17, 2006).
vii Jeremy Caplan, In a Real Crunch, TIME, May 28, 2006, available at http://www.time.com/time/magazine/article/0,9171,1198902,00.html.
ix 15 U.S.C. §§ 1114, 1125(a) (1947).
x Cereality at 21–38.
xi Cereality Cereal Bar & Café Settles Ohio Lawsuit Against Copycat, Aug. 2, 2006, available at http://www.cereality.com/press/CerealitySettlesLawsuit.pdf (last visited Apr. 2, 2008).
xiii Cereality, Café Locations, http://www.cereality.com/exp_stores.php (last visited Apr. 2, 2008).
xiv Freeculture.org, Cereal Solidarity, http://freeculture.org/cereal (last visited Mar. 31, 2008).
xvii See generally State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998).
xviii 333 U.S. 127 (1948).