Small Business

Trademarks Take On New Importance in Internet Era

Pretzel Crisps
Source: Pretzel Crisps | Facebook

Princeton, N.J. — As a serial snack-food entrepreneur, Warren Wilson is no stranger to the challenges of running a business.

In the early days of his first enterprise, selling funnel cakes at fairs, there was the time when, tired of losing money on inclement days, he bought weather insurance — and proceeded to lose even more money than he had when it rained. In the 1990s, he and his wife and business partner, Sara, once had to mortgage their house and sell off investments to make their company’s payroll.

But it still came as a bit of a shock when the Wilsons made what they thought was a routine move to register the trademark of their hot product — a flat pretzel snack called Pretzel Crisps — and it was contested by none other than Frito-Lay, the 800-pound gorilla of the snack food market owned by PepsiCo.

“This is so different from anything else we’ve faced because we’re not fighting a product in the supermarket, we’re not fighting against an institution like a bank, we’re not dealing with an act of nature,” Mr. Wilson said in an interview at his company’s headquarters here. “This fight is about a big company that wants to dominate the snack food category by crushing a little company like ours rather than by competing with us.”

Frito-Lay, whose Rold Gold pretzel products and Stacy’s Pita Chips compete with Pretzel Crisps, declined to discuss the case, citing the pending dispute with the Wilsons’ company, Princeton Vanguard.

But in its filings with the Patent and Trademark Office, Frito-Lay contends that Pretzel Crisps cannot be registered as a trademark because it is a generic term. “Like ‘milk chocolate bar,’ the combination of ‘pretzel’ and ‘crisp’ gains no meaning as a phrase over and above the generic meaning of its constituent terms,” the company wrote in a 2010 motion.

The dispute is still pending with the trademark office’s trial board.

Trademarks, which are names or symbols associated with a specific company or product, can be tremendously valuable to companies building a brand. Think of Kimberly-Clark’s Kleenex facial tissues or Nike’s swoosh logo.

Brand experts and trademark lawyers say the value of simple, easily understood brand names has escalated in the Internet era because consumers are more likely to find such products while doing searches on the Web.

“You’d rather have a name like Moviefone than one like Fandango because that’s what someone is going to plug into a search engine, but without a doubt, you are going to be challenged,” said Allen P. Adamson, managing director of Landor Associates, a brand design firm.

With so much at stake, companies are much more likely to fight over trademark rights. For example, Apple,Microsoft and Amazon are embroiled in a dispute over the term “app store,” for software applications, which Apple moved to trademark in 2008.

For small companies, the cost of fighting a trademark battle can go beyond dollars and cents.

“The big companies will do this to rough up their competitors,” said Barton Beebe, a professor at the New York University Law School who specializes in intellectual property law. “If they can’t win in the marketplace, they try to soften them up with legal fees and distract them. Even if they lose the case, it’s a Pyrrhic victory because the small company has wasted so many resources.”

For Pretzel Crisps, Princeton Vanguard already has spent $1 million on legal fees, hiring David H. Bernstein and Joe DiSalvo, who won control of the Vitaminwater name for Glacéau, which is now owned by Coca-Cola.

Trademark lawyers say it’s unclear how strong a claim the Wilsons have to the term pretzel crisps, even though they have been using it since their snacks first went on sale in 2004.

F. Scott Kieff, a law professor at George Washington University, said the case could go either way. Princeton Vanguard, he said, “will have to show that there is some secondary meaning to the term ‘pretzel crisp’ out there in the relevant population that goes beyond simply provoking thoughts of thin pretzels that are crispy and refer to something specific.”

In any case, Frito-Lay has a clear financial incentive to dent the sales of its rival.

The pretzel market is dominated by Snyder’s-Lance and Frito-Lay, whose Snyder’s of Hanover and Rold Gold pretzels are top-selling brands, according to Symphony/IRI, a market research firm in Chicago. (The firm’s data does not include sales in Walmart stores, warehouse clubs or liquor stores.)

Symphony/IRI views Pretzel Crisps as a cracker, but if counted as a pretzel, it would be the No. 6 player.

Retail sales of Pretzel Crisps are growing quickly and last year exceeded $100 million, according to Princeton Vanguard. Meanwhile, sales of Rold Gold pretzel products have decreased slightly over the last couple of years.

Frito-Lay has tried unsuccessfully to sell its own flat pretzels. For about three months in 2008, shoppers at some 50 Sam’s Clubs could buy boxes of Rold Gold Pretzel Chips, which looked something like a window frame. Later, the company offered Rold Gold Pretzel Waves, a ruffled flat pretzel, which were more widely distributed and came in a variety of flavors.

Neither product is still being sold.

The Wilsons have long been snack peddlers. Mr. Wilson’s first venture was in 1969, when he set up a stall at the Allentown Fair and began making funnel cakes based on his grandmother’s recipe. Somewhat to his surprise, “we did really well,” Mr. Wilson said.

Five years later, he had enough money to open a retail outlet, Pennsylvania Dutch Treats, selling coffee, omelets and funnel cakes in the food court at the Paramus Park Mall in New Jersey.

Next door was a Baskin-Robbins where the future Mrs. Wilson was scooping ice cream to supplement her earnings from a small advertising agency. “We’d trade funnel cakes to use the copy machine in the mall office to run off form letters to send to theme parks to make appointments,” Mr. Wilson said.

The business grew and grew, but the problem was “anyone can make a funnel cake,” Mr. Wilson said. “You can’t trademark or patent it.”

At a fancy foods show in the early 1980s, Mrs. Wilson concluded that it was time for something ready to eat. “I was standing over this hot plate with hot grease splattering all over me, and everyone else around me was opening up these packages, very simple, no mess,” she said.

The couple ventured into croutons, which failed but led them to their first big hit: bagel chips.

They put the toasted bagel slices in a bag and began courting deli brokers, the salesmen who supply deli counters in grocery stores and other outlets. That strategy was crucial because it allowed them to avoid the costly battle for supermarket shelf space, including the typical demand from retailers that suppliers frequently restock and service their shelves.

The chips were such a hit that the Wilsons built tunnel ovens at a factory in Illinois and soon were pushing 100,000 bagels through high-speed slicers every 24 hours.

They called their bagel chips New York Style Bagel Chips and registered New York Style as a trademark in much the same way they are now trying to register Pretzel Crisps. In 1992, they sold the business to Nabisco.

The idea for Pretzel Crisps was born in 1994. As Mrs. Wilson worked a graveyard shift at a factory in Ohio making puffed pretzels, she said it hit her: “What if you took the middle, the air, out?”

But initially, they couldn’t figure out how to make flat pretzels. “Everything we tried produced a pretzel that was too brittle or too thin,” Mr. Wilson said.

So they shelved the idea and instead spent nearly a decade selling outsize plastic bottles filled with popcorn, customized with the logos of sports teams.

By then, new technology had developed that allowed them to produce a flat pretzel. “We called up the deli brokers network that was in place from the bagel chips days,” Mr. Wilson said. “They were a little skeptical to begin with, but once they sampled it, they got it. “

Mr. Adamson, the brand expert, said that even if the Wilsons lost the trademark case, their pretzel brand would survive. “They own other distinctive elements and have a great product so that, if they finesse it, they could end up with a black eye and not worse,” he said.